From the archive:What goes in an offer letter?

I read a story in the Human Times, a newsletter from EY, that the shared space company WeWork, has, for the most part, eliminated their use of non-compete agreements. They overreached who they had signing them at the hiring stage. Courts do not like non-competes. So be careful about their use. In fact you need to be careful about what goes into an offer letter. Here is some guidance from my archive.

Offer letters are not the end of negotiations.
Offer letters are not the end of negotiations.

What goes in an offer letter? I get this question more frequently than you might expect. Of course, all you have to do is enter that question in an Internet search and you will find plenty of advice. In fact here is one of the most comprehensive lists I have seen. If you included everything in your offer letter it would be about 14 pages long.
Must be included
All good letters need to have an introduction and a welcome statement. You want to take every opportunity to begin the “engagement” process. The sooner you get people connected the better it will be.
A position title and the wage to be paid are important. One thing that is often a mistake is how the offer is stated. It should be stated in the minimum pay period you pay. If you are paying on an hourly basis, that is easy. Most exempt employees, however, tend to think in terms of annual salary, so you can say something to the effect of “You will be paid $2500 bimonthly, which annualizes out to a $60,000 per year.” Additional compensation possibilities should be included.
Unless you are offering a specific employment contract you want to make sure a statement that employment-at-will is the standard is included.
If the offer is pending successful completion of either a drug test, a medical exam or a background check make sure that notification is included.
A statement about benefits and the eligibility period should be included, but rather than putting all the information in the offer letter you can state that complete information will be covered in orientation.
This is not a comprehensive list, but one thing that needs to be included is a statement on agreements.
Many companies have confidentiality agreements, noncompetes and nondisclosure agreements. Depending on the level of position they agreements may be signed up front or on the employee’s first day of work. If you do the latter it is important to make sure you let the employee know they will be required to sign those agreements. According to Theodore Olsen of Sherman & Howard LLC, in a recent Pennsylvania court decision the court ruled that “the offer letter was not the governing contract, but was basically part of the negotiation process.” The case dealt with an employee violating a non-compete he had signed. He had argued that the offer letter was his contract. The company stated that the employee had signed a binding agreement after he had started work. The PA Supreme Court agreed with the company because in their offer letter they had stated that he would be required to sign “an employment agreement with definitive terms and conditions outlining the offer terms and conditions contained herein.”
So the next time you are crafting an employment offer make sure you include the standards, but also make sure you include this statement about what agreements will be included.

2 thoughts on “From the archive:What goes in an offer letter?”

  1. Mike, thanks for providing HR professionals with much-needed information. I’ve done a couple of additional things regarding offer letters; if it’s a leadership position, and I’m making an offer I reasonably presume will be met by a counter-offer from the candidate, I’m careful to use words denoting that “offer” language. Once all issues are agreed upon, I provide a more formal offer letter, outlining salary, start date, reporting relationships, key metrics, etc. I like your language about stating salary – I use the phrase “not paid until due” when I quote an annual rate.
    I also created and have used a much less “legal sounding” offer letter, designed to be sent from the hiring manager; not HR. That letter talks about where to park on your first day, how lunch is handled by others in the department, how they’ll get office supplies, etc., etc. The letter also explains what their first 5 days of employment will be like; whom they will interact with, where, and for how long.
    I’m happy to provide samples of either of these letters if it would be helpful to a fellow-HR pro. Steve Lovig

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