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How to Create an Employment Offer Letter

An employment offer letter is used to formalize the terms of a job offer and serves as evidence of the negotiations between the parties. This article explains the various terms contained in employment offer letters and will help you integrate these letters as part of an effective recruiting strategy.

Relevant Dates

After entering the contact information of the employer and the job candidate, you will need to decide whether or not you want the job offer to expire at a certain time. As a practical matter, job candidates usually know that the offer might not be available if they wait too long or another candidate accepts first. However, it is usually a good practice to include an expiration date. This helps both parties, as the candidate will know how much time he or she has to decide, and the employer will know that it won’t have to wait around forever for an answer. In the meantime, the employer is still free to interview other candidates, but should hold off from extending any other job offers until it receives an answer.

Employment Term

Indefinite or Fixed Term

Next you will indicate whether the position will be for an indefinite period of time or a fixed term. Most positions in the United States are for an indefinite period of time. This is called “at-will employment,” which means that both parties have the right to decide when to end the employment relationship. The employer can choose to terminate the employee at any time, with or without cause, just as the employee can choose to quit and leave at any time and for any reason.

Penalties for Ending a Fixed-Term Contract

However, just because at-will employment is the most common doesn’t mean the fixed-term positions don’t occur—quite the contrary. As the name implies, a fixed-term position guarantees that the employee will perform his or her job duties for a set amount of time. There is usually a penalty if either party decides to end the contract early. Whether a position is for an indefinite term or a fixed term has more to do with the type of position and the circumstances surrounding employment.

Advantages of Both Types of Employment Agreement

At-will employment has the advantage of allowing either party to terminate the relationship if things are not working out for whatever reason. For example, maybe the employer discovers that the employee isn’t performing up to par or is just no longer needed, or maybe the employee has a major life event and needs to relocate.

Fixed-term employment is more appropriate in situations where the parties are confident in the employee’s ability to do the job well, and one or both of the parties want the guarantee that the employee will stick around for a specific amount of time. Although there may be penalties if one of the parties voluntarily ends the contract early, the employer can also include contingencies that allow it to end the contract early without penalty. For instance:

  • the employer might go out of business,
  • the business might be sold, or
  • the contract may end if the employee is unable to complete certain benchmark tasks.

The law gives the parties great flexibility in deciding the exact terms and contingencies associated with structuring their business relationship.

Job Details

It’s a good idea to include a brief description of the job duties the candidate would perform. This is mainly to give the candidate an idea of what kind of position the employer is offering. The employment agreement that the parties sign after the candidate accepts the job will provide the final word on the job duties and often allow the employer to add additional job duties at any time.

Compensation

Next, select the compensation structure for the position. When selecting the pay period, you have the option of leaving this term flexible by choosing to pay the employee “according to payroll policy.” This means that the employee will be paid according to whatever the employer’s policy is for paying its employees, which can change from time-to-time. However, if the employer’s pay period doesn’t change often, it’s a good idea to select the standard pay period so that the employee will know ahead of time what the situation will be.

Benefits

If any benefits are offered for the position, you will probably want to include them as an incentive for the candidate to accept the offer. A benefit could be any perk offered by the employer that it isn’t legally obligated to provide. For instance, potential benefits could include:

  • paid time off,
  • health insurance,
  • pension,
  • signing bonuses,
  • performance bonuses,
  • flexible work hours,
  • time to work from home,
  • a company car or phone, and/or
  • stock options.

Explain any relevant details that the candidate would want to know about any benefits being offered.

Additional Terms

This is your opportunity to add in any specific terms or promises associated with the position. For example, you may want to specify that the candidate would be regularly subject to performance reviews, or you might want to include any penalties or contingencies for ending a fixed-term contract early. Be sure to preview the document first to see what has already been included.

Final Steps

It is important to note that this letter is not a binding employment agreement. After the candidate accepts the offer letter, the parties will sign an employment agreement that incorporates the terms of the employment offer letter and includes more details and legal protection for the parties. Therefore, there is no need to have the candidate sign this letter. In fact, the candidate should definitely not sign this letter, since a court may consider it evidence that the letter was meant to be a binding contract.

The letter is meant to serve as evidence of negotiations and requires the parties to execute a separate employment agreement prior to the start of employment. After sending the letter to the candidate, the candidate can accept the employment offer simply by notifying the employer by any mode of contact.

Let us help you get started today. Use our employment offer letter template to create your offer letter now.