What can include in an offer letter can depend on your stage of growth, type of employee, commissions, bonuses, and more. Confused? Here’s where to start.
Unless you’re a sole proprietor and determined to stay that way, every small business eventually gets to the point of needing to hire staff. If you use an offer letter you’ve received in the past, that strategy really only works if you’re still in the same industry and even then it might be a stretch. Job offer letters from an employer to an employee vary drastically depending on your specific business and what stage it’s in.
An offer letter will change based on your stage of growth, the level of the employee, whether you’re offering equity, bonuses, commissions… you get the pictures. The list goes on.
For those who are wondering where to start, this article the perfect primer.
What exactly is an offer letter?
Offers of employment can be made verbally or in writing. An offer letter is any notice in written form that informs a candidate that they have been selected for employment. It’s a formal letter that often includes the details of employment, from the start date, to benefits and, most importantly, the terms of employment.
What to include in a job offer letter
Again, it all comes down to what is and isn’t relevant to your small business and its hiring process, but a few common elements to consider covering include:
- Conditions. A job offer letter can be conditional, meaning it depends on the selected new hires passing certain tests, such as background or drug checks.
- Salary. Of course the amount of money your employee will be making as well as pay periods are two things that are commonly found in offer letters.
- Benefits. If health, dental, and vision insurance (or some combination of the three) are part of employment, benefits are also typically spelled out in a job offer letter.
- Equity. Whether or not an employee is offered equity and when those shares actually go into that person’s possession (dispersal of equity is often spread out over several years) should also be included.
- Duties. Be sure to clearly spell out what will be expected of the employee in their new role.
- PTO. Sick days, vacation days, and policies on paternity and maternity leave are also often included in offer letters so everything is clear from the start.
Is a letter of offer a binding contract?
Whether or not a job offer is a binding contract depends on a few things. Technically, they’re all binding contracts, but it’s the terms of the contract that dictate just how binding it is. Most job offer letters will include a formal start date but say nothing about the term of employment (aka the end of it). Instead, there is often a clause describing the employment as an “at-will” contract, which means that either party can terminate it as long as the terms of termination are met (this is where the amount of time necessary for giving notice and the like are taken care of).
Samples, samples, samples
The best place to start building your own offer letter is by looking through employment offer letter templates and examples of offer letters that other businesses have used. If you’re looking for inspiration, the Balance offers some great templates as does Rocket Lawyer. The Spruce is another excellent place to go for examples.
Pulling from all of the above, here’s one example that can give you a good sense of what an offer letter should look like in general:
Title: Job Offer From [Employer Name]
Dear [Candidate’s Name],
We’re delighted to extend this offer of employment for the position of [Job Title] with [Company Name]. Please review the terms and conditions for your anticipated employment with us. In summary,
Your starting date will be [date]. The starting salary is [dollar amount] per year and is paid on a weekly basis with direct deposit is available.
[Brief description of benefits] will be provided through our company’s employee benefit plan and will be effective on [date].
[Company Name] offers paid-time off plan which includes [brief description of PTO offered]. Eligibility for the company retirement plan begins [number of days] after your start date.
If you accept this offer, you would report to [Manager Name].
Please review the attached the terms and conditions of your employment, should you accept this offer letter. We would like to have your response by [date]. In the meantime, please feel free to contact me or [Manager Name] via email or phone at [provide contact details] if you have any questions.
We look forward to having you on our team.
Ultimately, an offer letter should be individualized based on your business and your needs. And it’s important to give it the attention it deserves, both from a compliance standpoint and as a first step in new employee onboarding.