Many companies ask this question. The answer is simple, to protect the company and communicate effectively with employees.
Some companies have operated under the premise that: It is better not to put anything in writing, since if something is not in writing, the company cannot be held liable. Unfortunately by doing so the company is creating a tremendous potential liability in case an Employee Relations Issue arises.
Regarding protecting the company a Good Employee Handbook is the First Line of Defense for any company. Employment Law (both Federal and State) is very complicated and is becoming more so all the time. Companies are mandated to comply with a whole host of government regulations and failure to do so can create tremendous liability in terms of: exposing the organization to financial liability (law suits, governmental charges/sanctions and legal fees) the loss of employee morale and trust and can impact company reputation externally.
This is especially true for small organizations who cannot afford to have a skilled/trained Human Resource Professional on staff. By having a Legally Strong Employee Handbook small companies can not only comply with the various Employment Laws but also gives the company an opportunity to communicate specific company policies and benefits to their employees.
Communicating upfront with employees can decrease the potential for employees who may not understand what is expected of them and what they can expect from the company. Failure to communicate effectively with employees from the beginning of their employment creates a potential of misunderstandings and can create situations where employees may violate company policies they did not know about. Employee Handbooks also help management personnel by providing a quick reference on what the company policy is when issues arise.
If there ever is a charge made against the company by a current or past employee or candidate for employment, the Employee Handbook and Job Descriptions will be the first things government regulators are going to ask for.