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Making Sense of New Hire DocumentsJob offer letters vs. employment contracts
Job offers and employment contracts are among the most important documents in your HR toolkit. They are the prerequisite of any employment relationship, and nearly every business has to refer back to them at some point to make good on a promise or to resolve a dispute. In both cases, misunderstandings or ambiguity can cost employers tens of thousands of dollars.
Employment contracts carry significant weight for startups in particular. Along with outlining roles, salaries, and other benefits, employment contracts set the terms for ownership of intellectual property, a vital asset for venture finance and acquisition prospects.
The problem is that many employers aren’t aware of what to include or how to present hiring documents to best protect their business, which puts them at serious risk. Here’s what business owners need to know to get their hiring documents right.
When it comes to hiring documents, there are two key elements: the job offer and the employment contract.
A job offer is a brief invitation from an employer to a potential employee to begin employment at their organization. Typically, the candidate and employer will have already discussed the position during interviews, and the job offer is simply to confirm that conversation.
Job offers can take the form of letters, or they can be made over the phone, in person, or via email. The offer should include general information about the job, including the title, start date, and employment status. It should also contain conditions of employment, such as whether the offer is conditional upon a background check or agreeing to the employment contract.
An employment contract, or employment agreement, is a far more detailed contract that spells out the employer’s expectations.
Employment contracts provide terms and conditions of compensation, probationary periods, benefits, vacation, termination, and restrictive clauses such as non-competition and confidentiality agreements.
There are two types of employment contracts employers can use:
The screening calls, interviews, and reference checks are said and done. It’s time to make an offer.
Step one: Make the initial job offer in person, by phone, or by email. This offer should be very brief and outline just the general terms of the position: title, start date, employment status.
Step two: Follow up with a written employment offer package. As early as possible before the candidate’s start date, mail or email them an employment offer package, which includes the formal job offer and detailed employment agreement. Allow enough time to read, understand, and negotiate the terms, if necessary.
Step three: Once they sign, begin onboarding! You should only turn down other potential candidates after the employment contract has been signed by your top candidate.
In many companies, it is common practice to separate job offer letters and employment contracts, asking candidates to sign an informal letter first, followed by a detailed contract after. We recommend keeping both hiring documents together for two reasons:
1.Legal liability: In a recent case from the Ontario Superior Court of Justice, the Court found an employment agreement that was signed after an offer letter to be unenforceable. Since the original offer letter constituted a contract in itself, the second, albeit more detailed, ‘employment agreement’ was considered void. To avoid this situation, employers should clearly state at every stage of the hiring process that employment is conditional upon agreeing to and signing the employment contract. Per employment and labour law partner Daniel Pugen, “All hiring documents should be presented at the same time and in advance of starting the job so that there is no confusion as to the contract being entered into between the parties.”
2. Unnecessary paperwork: Starting a new job is already an overwhelming process. Why add to that with more forms than necessary? Nevermind having to sort and store them among all the other employee records. Eliminate paperwork and keep your onboarding streamlined.
If you still wish to have a separate offer letter, that is okay. Just make sure to present the letter and contract to the employee on the same date. We also recommend stating in the offer letter that employment is conditional upon the candidate agreeing to and signing the employment contract.
Under common law, three elements are necessary to make an employment contract a contract: (1) an offer; (2) acceptance of the offer; (3) consideration—something given or promised in exchange by both parties. For example, an exchange of wages for work performed.
An oral contract that contains these elements is just as binding as a written one, but you should always put employment contracts in writing. This is a legal requirement for employee record keeping purposes and reduces the risk of misunderstandings that can lead to disputes.
A good job offer package can set the tone for a successful working relationship, address contentious issues early, and protect both parties down the line. Here’s our roundup of best practices:
Seek legal advice: Before entering into a contract, review your jurisdiction’s Employment Standards Act and seek legal advice where necessary.
Make it personal: A base template is a good idea, but don’t use a standard contract for every single employee. Carefully review and personalize the contract’s formality, terms, and details before each new hire.
Send a job offer package: Avoid sending a formal offer letter first and an employment contract at a later date. Present all hiring documents at the same time.
Give them time: Employment contracts must be signed prior to the employee’s first day of work. Be sure to give them enough time to read, understand, and negotiate the terms if necessary (at least one week).
Include consideration: If you amend an employment contract after an employee has started work, as in the case of promotions or policy changes, you may have to give new consideration (i.e. signing a bonus, new salary, or new stock options) or the contract will not be enforceable.
Avoid legalese: Ensure the language is as clear as possible. If you don’t understand the terms without a lawyer, neither will your candidate.
Keep your candidate pool open: Don’t turn down other potential candidates until your top candidate has signed and returned the employment contract.
Review and update: Review your employment contract template every year to ensure it is compliant and up-to-date with employment standards in your jurisdiction.
Go digital: Send and store your employment contracts with your digital HRIS. Employers in Canada and most other countries are required by law to keep employee records even after the employment relationship has ended (check with your jurisdiction to find out how long). A digital, cloud-based copy ensures it is always on-hand.
However, you can also present them with a job offer letter which can protect you should A job offer letter simply puts in writing the terms of the job offer so that.
Use this sample job offer letter template from employer to employee when formally offering a full-time position to your best candidate. This template includes a sample job offer email along with a formal job offer attachment to send to candidates. It covers the most important employment terms:
You can customize this sample offer letter format and add, modify or remove specific terms and benefits. Note that the following job offer template contains placeholders that you can easily fill with your company’s data.
It’s best to contact your candidate via phone or email to announce you’re extending a job offer before sending this formal document.
If you’re sending the offer letter via email, make sure to:
You can also personalize the email body text and tweak the tone to match your company culture. But, keep the language in your employment offer letter formal and clear, as it’s an official document that describes the employment terms between you and your future hire.
Keep in mind that this template is not a legal document and may not take into account all relevant local or national laws. Please ask your attorney to review your finalized job offer letter.
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Email subject line: [Company_name] job offer / Job offer from [Company_name]
We’re delighted to extend this offer of employment for the position of [Job_title] with [Company_name]. Please review this summary of terms and conditions for your anticipated employment with us.
If you accept this offer, your start date will be [Start Date] or another mutually agreed upon date, and you would report to [Manager_name].
Please find 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 are all looking forward to having you on our team.
II. Cash compensation
III. Bonus (or commission) potential
IV. Employee benefits
V. Privacy and confidentiality agreements
VI. Termination conditions
VII. Interpretation, amendment and enforcement
Your title will be [Job_title], and you will report to the Company’s [Manager’s job_title].
This is a [full-time/part-time] position requiring approximately [e.g. 40] hours per week. Your regular weekly schedule will be [e.g. Monday to Friday 09:00-17:00].
Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you.)
The Company will pay you a starting salary at the rate of $[Gross annual salary] per year, payable in accordance with the Company’s standard payroll schedule, beginning [start day] and you will receive your first paycheck on [date]. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies.
All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities and you will not make any claim against the Company or its Board of Directors related to tax liabilities arising from your compensation.
In addition, you will be eligible to be considered for an incentive bonus for each fiscal year of the Company. The bonus (if any) will be awarded based on objective or subjective criteria established by the Company’s Chief Executive Officer and approved by the Company’s Board of Directors. Your target bonus will be equal to [percent]% of your annual base salary. Any bonus for the fiscal year in which your employment begins will be prorated, based on the number of days you are employed by the Company during that fiscal year. Any bonus for a fiscal year will be paid within [number] months after the close of that fiscal year, but only if you are still employed by the Company at the time of payment. The determinations of the Company’s Board of Directors with respect to your bonus will be final and binding.
As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits.
The Company offers a comprehensive employee benefits program, including:
You will be eligible for [number] days of paid vacation leave per year. Paid time off is additional to sick days, bank holidays and days that the company does not operate.
As all Company employees, you will be eligible for the private health and dental insurance plan we provide. Specific terms and conditions may change upon vendor’s decision.
Subject to the approval of the Company’s Board of Directors or its Compensation Committee, and following the adoption by the Company of an equity incentive plan, you will be granted an option to purchase [number] shares of the Common Stock of the Company or of its parent (the “Option.”) The exercise price per share of the Option will be determined by the Board of Directors or the Compensation Committee when the Option is granted. The Option will be subject to the terms and conditions applicable to options granted under the Company’s Stock Plan (as adopted, the “Plan”), as described in the Plan and the applicable Stock Option Agreement. You will vest in 25% of the Option shares after 12 months of continuous service, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement.
You are required to observe and uphold all of the Company’s privacy policies and procedures as implemented or varied from time to time. Collection, storage, access to and dissemination of employee personal information will be in accordance with privacy legislation.
While you are employed at this Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter of agreement, you confirm that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.
Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement.
The Company reserves the right to terminate employment of any employee for just cause at any time without notice and without payment in lieu of notice. The Company will be entitled to terminate your employment for any reason other than for just cause, upon providing to you such minimum notice as required by law.
This letter agreement supersedes and replaces any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitute the complete agreement between you and the Company regarding the subject matter set forth herein. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company.
You may indicate your agreement with these terms and accept this offer by signing and dating this agreement by [date the offer expires]. Upon your acceptance of this employment offer, [Company_name] will provide you with the necessary paperwork and instructions.
Company Representative (Sign)
Company Representative (Print)
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We often approach signing offer letters with as much caution as we do launching a new app: completely skimming past the terms and conditions and clicking “accept” before knowing what we’re really getting into. I understand the temptation to do so — signing the offer letter is the final piece of the puzzle, and getting it over with as quickly as possible allows you to breathe a sigh of relief after all of the time and energy you put into the job hunt.
But the fine print can carry some serious weight, and shouldn’t be ignored.
“Job offer letters are tricky and should be read carefully. Sometimes information about title, compensation or duties will not make its way into the letter accurately — usually inadvertently,” says Bryan Wood, Manager at The Wood Law Office, LLC. “But offer letters frequently also include non-negotiable ‘terms and conditions’ of the new job not routinely discussed in interviews… in this case, you need to consider whether the [position is] right for you.”
Nikki Larchar, Co-Founder/Human Resource Business Partner at simplyHR LLC, agrees.
“Since the offer letter is a legal document, it can be difficult to make changes after it has been signed… Wanting to make changes to the offer letter after this point causes a huge traffic jam, and creates additional work for others,” Larcher says.
So before you sign that dotted line, look out for these ten things — whether you can negotiate them or not, being fully informed can only help you make better decisions.
Paying close attention to your start date is a must: there are few ways to make a worse impression at a new job than not showing up at the right time. Additionally, if you have a vacation planned or need to relocate, you may want to request that the start date be pushed back. But beyond your start date, there are a number of other important dates to keep in mind.
“Generally, there are specific dates when medical insurance, 401k, and time off accrual kick in,” says Dana Case, Director of Operations at MyCorporation — so don’t go planning a doctor’s appointment, vacation, or your retirement without first referencing the offer letter.
Also worth checking? Whether or not you’re subject to “‘probationary’ periods during which you can be fired for no reason,” Wood says.
8 Must-Ask Questions About Your Company’s Health Insurance Options
Of course, before you sign a job offer letter, you need to agree on what the job actually involves — you don’t want to agree to take a position when the responsibilities have been misrepresented to you. It’s also critical to have a record of these in case your position evolves in the future.
“Ensure that all your job responsibilities are clearly outlined and described in the offer letter,” advises Valerie Streif, Senior Advisor at career services company Mentat. “This is important so that if in the future your boss tries to change your responsibilities or downgrade you in some way, you have it in writing what you are supposed to be doing.”
You might have already discussed salary on the phone or in an email, but now’s the time to make sure that it matches up on paper, too.
“Make sure the compensation package meets your expectations. If you discussed it in the interview, confirm the letter has what you agreed upon. If not, reach out to the hiring manager to find out if it’s an error. If you didn’t discuss salary and the numbers are lower than expected, you have the right to negotiate your salary. You don’t want to agree to something that makes you feel undervalued,” says Susan Joyce, owner and operator of Job-Hunt.org.
If the salary listed on the offer letter is in a different format than what you’ve previously discussed — i.e. a bi-weekly paycheck amount — “do the quick math to make sure it adds up to the yearly negotiated salary,” recommends Krystal Covington, Director of PR at Natural Grocers and CEO/Founder of Women of Denver.
“Communication discrepancies can happen between the negotiating table and the HR department, so it’s important to verify that everything is solid before you make the paperwork final,” Covington adds. “I have personally had to reference my offer letters in conversations with HR departments when they’ve mistakenly put the incorrect salary or vacation time in the system. I’ve also had this happen [during] yearly raises and have had to bring the paperwork up for evidence that I’ve been paid incorrectly. Although most people don’t have my bad luck with HR mishaps I would still suggest keeping records to ensure you always have backup when something goes wrong.”
5 Rules of Salary Negotiation
While the annual salary will probably be the figure that catches your eye the most, take heed of the bonus system description as well.
“Money matters can get incredibly messy — so making sure that both your salary and any guaranteed bonuses that you were told you’d get are clearly stated in the letter is critical,” Streif says. “This way, if in the future you are denied a bonus, you can pursue it as a breach of contract if necessary.”
And beware of wishy-washy language being used to describe bonuses.
“Know at least the basics of target percentage, timing (annual vs. monthly) and criteria, such as whether it’s discretionary or guaranteed,” says Jill Santopietro Panall, HR Consultant/Owner of 21Oak HR Consulting, LLC.
From parental leave to free lunches and even pet insurance, companies offer a number of perks — and while you can’t expect all of these to be explicitly stated in your offer letter (more commonly, they’ll be in the employee handbook), there are a few key benefits you should look out for.
“Some of my clients want to throw the kitchen sink in their offer letter and that’s not necessary, especially for standard policies covered in the employee handbook (such as how many bereavement days you get and when you can eat lunch),” says Santopietro Panall. “However, the letter should contain anything special that you have negotiated… such as extra vacation time, a paid cell phone, a company car, or bonus potential. It’s fairly easy for a hiring manager to say ‘Oh, I never said you could have four weeks of vacation’ after you start and, without any written record, you’re probably stuck with the company minimum.”
Besides that, Case advises “[checking] to see if any other hidden perks are mentioned.” After all, you can’t take advantage of what you don’t know about!
10 Companies Offering Benefits to Part-Time Employees
Non-disclosure and confidentiality agreements are standard practice in offer letters. Typically, they state that you must keep sensitive information that you learn in your tenure at a company private, or else face consequences such as firing or lawsuits. This may cover financial reports, communications, product design, or any other number of internal items.
It’s best to stay on the safe side and keep any non-public information that you learn at your job private, but if you’re the kind of person who has a particularly hard time keeping a secret, it’s worth looking into what exactly you need to keep on the down-low and what will happen to you if you don’t (nothing like the added threat of litigation to help you keep your lips sealed).
One of the most overlooked yet critical components of an offer letter that came up repeatedly in our conversations with legal and HR experts was the non-compete clause, which Rocket Lawyer defines as “a contract between two parties, where one party agrees not to compete with the other for a period of time.”
“These agreements can severely limit the employee’s ability to seek other employment down the road. For example, the employee can be prevented from working in his or her industry for some period of time within the geographic region where he/she is working. Therefore, to seek new employment, the employee would then have to wait for the agreement to lapse, move to another geographic area, or change industries,” says Andrew Horowitz of Obermayer Rebmann Maxwell & Hippel LLP. “Since this can have severe ramifications for the employee’s life, it is important to be sure that you are not entering into such an agreement without careful reflection.”
10 Dos & Don'ts of Salary Negotiation
Another legalese term to look out for is non-solicit agreement, says Horowitz. This is a contract in which an employee agrees not to solicit their employer’s customers for a certain period after leaving the company. You might be tempted to one day quit your job and start your own business using the relationships you’ve built with customers, but if you’ve signed a non-solicit agreement, be careful — the ramifications are significant.
At-will employment means that an employee can be dismissed by their employer at any time and for any or no reason at all (barring cases of discrimination, retaliation, and other special circumstances). This may sound a bit alarming, but it doesn’t mean that your company will go around firing people on a whim — it’s simply the law of the land for most of the United States. And, on the flipside, it means that you as an employee are entitled to leave your employer at any time, regardless of reason.
The final tricky provisions to look out for are arbitration clauses, which state that any disputes that arise between an employee and an employer must be settled by a neutral third party — i.e., not through a lawsuit. Streif advises looking out for these as they “could potentially give you legal headaches down the road.” Often, she says, “employers will try to slip these in and it can cause issues if you try [to take] your employer to court some day… Protect yourself and make sure that you are aware if these agreements are in your offer letter.”
Tagsemployment lawJob OfferKnow Your WorthLegallegal adviceofferoffer letter
However, you can also present them with a job offer letter which can protect you should A job offer letter simply puts in writing the terms of the job offer so that.
Excellent, you’ve gone through the advertising & interviewing processes, and have found a suitable candidate for your vacancy. You’ll want to get the job offer out as quickly as possible, intending to have your new employee working for you soon. Before you send off that letter of confirmation though, make sure it covers what it should, while not giving away more than you intended.
A binding contract will be formed once the requirements of the job offer have been accepted. It is therefore important to ensure all necessary or possible conditions you may want to rely upon are included in the letter of offer; you will not be able to go back on this at a later stage, and a failure to honour the contract could result in a claim for breach of contract.
If the letter isn’t on headed paper, make it clear who the employer will be – if you’re a director, ensure the name of the company doing the hiring is clearly identifiable
The date the offer is made, and when this needs to be accepted by
The desired or required start date
The job title, or a brief description of the role
Conditions that will apply – your safety net.
Statement of Particulars
Copy of staff handbook
There will be often be issues that employers haven’t been able to confirm before making the offer of employment, and these will need to be included in the letter of offer.
Medical examination – if this is a requirement, this should apply equally to all candidates, not selectively, for disabled people or others.
Proof of qualifications or abilities – most potential employees will have advised what formal qualifications they hold during the recruitment process, and employers will need to confirm these either before the employment or as part of the induction. For those employees who have declared abilities relevant to your vacancy, this will only be clear during the employment, so a probationary period will be necessary.
References – you are inviting a complete stranger into your workplace, so make sure any offer is subject to suitable references.
Criminal Records Check – even with references, employers should consider checking the candidate has no skeletons in the closet.
Eligibility to work in the UK – it is the responsibility of the employer to ensure their employees are eligible to work in the UK, so never rely on references for this, or even the fact that someone had previous employment. Business Link provides an online tool to assist employers, or contact Employment Law Clinic for assistance:
What is an employment agreement/offer letter? An employment agreement sets out the terms and conditions of the relationship between an employer and an.