The offer letter is a tool to inform a successful applicant of your intention to hire them and information about the relationship.  The offer letter is also a tool to effectively communicate information, expectations, and more.  However, too often we encounter business owners who confuse an offer letter with an employment contract or fail to include critical pertinent information that is useful to the applicant and protects the employer.  Here are a few recommended items to include in your offer letter.

  • Position/Title.
  • Name/Position of Supervisor.
  • Full-Time/Part-Time status and work schedule.
  • FLSA Status meaning Exempt / Nonexempt Classification.
  • Base Compensation and consider using a salary for exempt offers and hourly rate of pay for non-exempt offers.
  • Equity. Briefly describe the terms of any equity grants (e.g., number of shares, vesting schedule), but be sure to also state that the grant will be subject to the terms and conditions of your equity plan and the employee’s grant agreement.
  • Bonus/Commissions. Briefly describe the terms of any bonus (e.g., target amount, criteria, payment terms) or commissions. If you have a formal bonus or commission plan (which is recommended), you should simply refer to the plan.
  • Benefits. Briefly describe the categories of benefits for which the employee will be eligible (e.g., medical insurance, PTO, sick leave, disability insurance).
  • Policies. State that employment will be subject to the company’s policies, procedures and handbook as adopted, revised or deleted from time to time.
  • At-Will Employment. If the employment is at-will (recommended), the offer letter should explain that either the employee or the company can terminate the relationship at any time, with or without cause or advance notice. Avoid language implying any fixed period of employment, or even “soft statements” about “looking forward to a long relationship.”
  • Contingencies. State that the offer is contingent upon a pre-employment background check clearance and satisfactory proof of the employee’s right to work in the U.S., as required by law.
  • NOTE: Certain states may require employers to provide additional documents.

Insight:

Developing an easy to understand and compliant offer letter for the various types of employees you hire can enhance initial engagement with the potential new hire, set clear expectations, ensure alignment with what may have been verbally discussed.  Setting an expiration on the offer, avoiding any conflicts with state compliance, use common language for similarly situated employees, etc. all enhance your HR practices. TAHR Services experts have been providing HR Advisory Solutions to business owners and leaders for decades impacting positive change to achieve desired goals and outcomes.  Establishing a relationship with an expert who cares about you and your business is key to sustainable success.  To learn more and have a discussion about your business goals contact Warren Cook at TAHR Services by scheduling a free discovery call today.

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