The Value of the Offer Letter

We all know how important it is to periodically review your employee handbook and other company documents outlining your employment obligations to employees. The offer letter is one of the first documents outlining the terms of your engagement with new hires. Making sure it addresses some critical elements can save you time, headaches, and even money down the road. In addition, a well-crafted offer letter can be a simple way to demonstrate to your new employee that they are joining a professional and well organized company. This is particularly helpful for a startup or small company as it conveys to the new hire that while the company may be small or new, it has some standard and thoughtful infrastructure.

Put It In Writing: The first step is an important one; don’t stumble.

With hiring on the rise in Massachusetts and across the country, you may be bringing more people on board. As you go through the hiring process and start to make job offers, remember that there’s more to the offer letter than the new employee’s title, start date and salary. A solid offer letter outlines the final details of the position and serves as a document of reference for both the employee and employer. By providing the key points of the position both parties have agreed to, it can serve to eliminate future questions and even legal challenges.

What a letter should include:

• The name of your company and the specific title/position for which the person is being hired;

• Additional details, such as:
• The name of the supervisor to whom s/he will report; expected start date, time and location;
• Position status – full-time or part-time; exempt or non-exempt
• Pay rate and how it will be paid. There are some nuances to how this is communicated. When we write offer letters for our clients, we always recommend that pay be stated in per paycheck increments as well as annually. We do not want to imply that we are committing to a year of employment rather than at-will employment.
• Other compensation – bonus eligibility, relocation reimbursement, sign-on bonuses, etc., including when payable and any special terms such as pay back of reimbursements upon termination within some period of time. If you pay bonuses, the offer letter should be clear about whether or not they are guaranteed. If they are not guaranteed, clearly outline how bonuses are earned.
• Benefits. How many details you include about benefits can vary. You’ll want to provide the general terms and if you have some benefits that are above average and real selling points to the new employee you may want to mention these. On the other hand, in general, you should not include specific plan provisions or commit to specific cost sharing terms as these are subject to change during the course of employment. We typically recommend that a general reference to benefits be included and that you send a brief benefits summary that the candidate can reference for more information. This allows you to keep the basic format of the letter standardized and changes only need to be updated on the benefits summary.
• A paragraph that includes an “at-will” employment statement that expresses both the employer’s and the employee’s right to end the employment at any time, within the bounds of the law. At-will employment status is state law driven so if you are making offers for companies based outside of Massachusetts be sure to check that state’s rules.
• The offer letter should reference what other items must be signed and returned, such as a confidentiality or non-compete agreement or forms authorizing background checks and noting that the offer is contingent on signing these documents and/or passing a background check. Include these forms in the package with the offer letter, as it is better to share these in advance in case there are issues with any of the provisions within them.
• The letter should close with contact information for the person who can answer questions about the offer or the job, and perhaps, the date by which the signed acceptance letter should be returned.

What the letter shouldn’t say includes:

• Words like “annual” and “guaranteed,” particularly when it comes to money. Salary details should be referred to in hourly, weekly or monthly rates, based on your pay periods. Again, if you state “an annual salary of $XXX dollars,” an employee could possibly infer that s/he will be employed for a full year.

• Statements about company practices and policies that could be considered binding. By using non-specific language and prefacing policy/procedure with “in general” or “typically,” indicate that these references are an overview. Leave specifics for the employee handbook and onboarding meeting.

If the letter is not being written by a professional well-versed in employment law, it is a good idea to have the final draft of your offer letter reviewed by a legal or HR consultant. You want to be sure that it complies with employment laws and that you are not making unintended promises that may be construed as contractually binding. Additionally, non-compete language and confidentiality requirements are generally better in a separate document as they tend to bog down the letter which should really be a positive invitation to join the company rather than a legalistic document of employment obligations. We generally recommend the offer be contingent on signing these documents or passing a background check, if relevant, but not be incorporated into the actual offer letter. Once the language is finalized, the offer letter can be saved as a template for future use.

We can help.

At A Hire Authority, our staffing professionals have been specializing in the full cycle of the hiring process for years and are experienced with writing offer letters, as well as with the other documents you may want to consider as you bring new employees on board. We help you develop and implement an overall recruiting and hiring strategy and learn about your business to responsibly and positively represent it to candidates. And we create or review and update everything from offer letters to policy and procedures to help protect you from bad hires.

Our unique business model allows us to do this in a way that saves you and your staff valuable time and money. Our hourly billing is more cost-effective than using a contingency or retained search firm to recruit top talent and engaging us allows your focus to remain on the critical business functions that can’t be outsourced. For more information, call Insource Services today at 781-235-1490.