Microsoft, General Motors and IBM have long recognized the virtues of having an employee handbook. What works for the big-time operators can work for you as well – even if you employ just a handful of workers.

Consider some of the advantages of having an employee handbook. For starters, once you give it to an employee, you don't have to remember whether you gave the employee a list of paid days off or explained your vacation policies. It's all there in the book and all workers are getting the same informa­tion.

In addition, your handbook can help protect you legally if an employee sues your company. For example, a handbook statement that sexual harassment won't be tolerated in the workplace can be crucial in a sexual harassment lawsuit.

Be aware, however, that there can be a legal downside to having an employee handbook. If you're not careful, your hand­book may be treated as a contract that limits your right to fire employees. To avoid that result, state in the handbook that employees don't have employment contracts unless they are in writing and signed by the company president. Also, make it clear that your company reserves the right to terminate employees for reasons not stated in the handbook or for no reason at all.

These precautions may not be foolproof. Courts tend to look at the handbook as a whole. If a reasonable employee would conclude that the handbook creates rights in the employee, a court might treat the handbook as a contract.

You can produce an employee handbook quickly and cheaply by using a self-help book or software program as a starting point. Modify the sample wording to fit your own needs. Then, if you have specific legal questions, see your lawyer.

Here are some topics to include in your employee handbook.

Introduction. Describe your company's history and business philosophy. This helps you set the tone – which can be friendly and welcoming if that's your style. But make it clear the handbook doesn't cover every possible situation.

Hours. State the normal working hours and how overtime pay is authorized for those employees entitled to it.

Pay and salaries. Be clear on how pay and sal­aries are set and how they're raised. In very small businesses, this may be a statement that levels of pay are established and adjusted by the company president, taking into consideration past performance, cost of living changes and the ability of the business to pay.

Benefits. Employee benefits typically include paid vacations, health benefits, sick pay and paid leaves for extended illness, pregnancy or family matters. Since the law doesn't require you to provide paid sick days or vacation days, you're free to set the terms under which such benefits are granted. Be clear on whether the employee can carry unused sick or vacation days into the next year and what happens to such bene­fits if an employee quits or gets fired. Finally, de­scribe any 401(k) or retirement benefits you offer.

Drug and alcohol abuse. Most businesses prohibit employees' use of alcohol or illegal drugs in the workplace. In addition, some businesses offer help to employees in dealing with abuse of these substances –often by paying for professional counseling.

Sexual harassment. Remind employees that sexual ha­rassment is illegal and violates your policies. Let them know that you won't tolerate unwelcome sexual comments or conduct, and that you'll assist those who speak up about it in ending any harassment.

Job attendance. Emphasize the importance of good attendance and showing up on time. Tell employees the types of absence that are excused, such as illness, and perhaps a family member's death. Also, explain that piling up a load of unexcused absences or coming to work late too often can be a basis for disciplinary action or even firing.

Discipline. List the kinds of conduct that can get employees in trouble – for example, theft or violence. But again, let employees know this isn't an exclusive list and that you always reserve the right to decide to terminate employment.

Employee safety. State that employee safety is a major concern and that employees are expected to heed the posted safety rules and to call to your attention any potentially dangerous conditions.

Smoking. Most businesses need a written policy for on-the-job smoking. Many cities and some states now prohibit or restrict workplace smoking. Be sure your policy meets the requirements of state laws and local ordinances.

Grievances. Let employees know the procedures for resolving grievances. Consider setting up a grievance committee consisting of employees who meet informally and make recommendations on employment issues.

Workplace civility. State that employees must treat each other with respect and that the success of the business depends on cooperation and teamwork.

Document that each employee received the handbook. This is another chance to let employees know that the handbook isn't a contract, that it doesn't guarantee you'll continuously employ them and that you're not obligating your company to continue the current job benefits forever.

To do this, include with your handbook two copies of an Employee Handbook Acknowledgement. Then ask each new employee to sign both copies to acknowledge that he or she has received the handbook and is familiar with its terms.

Keep one signed copy of the acknowledgment in the employee's personnel file maintained by your business. The employee can keep the other copy. Have each employee sign a similar receipt each time you distribute significant revisions or updates of your handbook.