Employment Offer: Key Terms to Know

What Is an Employment Offer?

If you own a small business and are looking to hire employees, you will need to create an employment offer document. An employment offer letter usually goes to the candidate you would like to hire after making an initial verbal offer, but before you complete contingencies like the background check. It also comes before either party signs an actual employment contract.

A typical employment offer will:

• Offer the job to the applicant
• Give details about the company and the job so that the candidate can better assess whether they want to accept the offer
• Summarize the main conditions and terms of the offer
• Serve as a place to start for employment negotiations

If your candidate decides to accept the offer, they will take the next step of signing the letter and returning it to you. Keep in mind, however, that an employment offer letter isn't always the same thing as an employment agreement that's legally binding. An employment agreement will include explicit legal protection for you and the person you are hiring. Still, it can help to have a legal professional evaluate the employment offer you create to make sure that it covers the necessary information.

Are Written Employment Offers Necessary?

You may make your initial employment offer over email or phone. However, you will want to follow that with a formal employment offer letter that confirms important details of the position you're offering, including:

• Benefits
• Job description
• Management structure
• Salary
• Paid leave

Furthermore, the employment offer might be contingent upon your new employee completing additional steps, such as:

• Passing a background check
• Passing a reference check
• Undergoing pre-employment drug testing

A written employment offer is an important step toward making this all official so that both parties have access to the information.

What Should An Employment Offer Letter Include?

There is no one standard format for an employment offer letter. However, most employment offers contain basic information like an overview of the position and specific job details, such as the start date, work schedule, and salary. You can typically order the elements of an employment offer letter to best fit your company and the role you are filling.

Common components of an employment offer letter include:

Company Logo and Letterhead

You can simultaneously convey authenticity and professionalism by using your business's official letterhead and a high-resolution image of the company logo. This can encourage your chosen candidate to seriously consider the offer you make.

Contact Information and Date

You should include the date as well as the candidate's full name and address in the upper left corner of your letter.

Greeting and Opening

Your letter's exact wording will depend a lot on your company culture, so you can make your opening as casual or formal as you want. Typically, you'll start the letter with "Dear," followed by the candidate's full name. Offer a line of congratulations that shows how enthusiastic you are about offering them the position.

Job Details

Make sure that your letter includes specific information about the position and the logistics of working for your company. You want to use the employment offer letter to give a candidate a sense of what to expect. You can also use this formal letter to clarify details that could have been overlooked or misunderstood during the interview process. For example, you can include information like:

• The position's formal title
• Employment classification, such as full time or part time
• Office location
• Anticipated start date
• Reporting structure, such as specifying who the candidate's supervisor or manager would be
• A brief description of the offered role and corresponding responsibilities

Contingencies

An employment offer may be contingent upon a candidate completing certain tasks or specific documents. You want to make this information clear in the letter. Common contingencies include:

• Background checks
• Reference checks
• Drug tests
• 1-9 forms
• Confidentiality or non-disclosure agreements

Here is further reading about what you can and can't include when doing a background check.

Compensation

Make the compensation package you are offering very clear. You can do this by including specific details such as:

• How much the applicant will make
• Whether you will pay the candidate on an hourly or annual basis
• How often you will pay the candidate
• Available methods for receiving payment
• If applicable, commission structures, equity, bonuses, and other related information

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Benefits

Along with the salary they can expect to make, a potential employee will also take benefits into consideration when deciding whether they should accept your employment offer. You should briefly summarize the key benefits your business provides in the letter. Include attractive benefits that may encourage a great candidate to accept the offer, including:

• 401(k) plan
• Educational assistance
• Flexible spending accounts
• Flexible work hours and/or work-from-home possibilities
• Insurance coverage
• Paid time off

Generally speaking, you will want to avoid getting too detailed here. Detailed information is better suited to an employee handbook or orientation package. However, good benefits can make or break a candidate's decision to work for your company, so you'll want to make sure that they know what perks they can look forward to if they decide to accept the job.

At-Will Status

Include an at-will statement in your employment offer letter. Most states are at-will states. This means that either a company or its employees may terminate employment for any reason at any point in time. A legal professional familiar with your state's laws can be invaluable in determining the proper language to use to describe your company's at-will status.

Expiration Date

Toward the end of the letter, consider whether you want to include an expiration date. A set deadline can help you avoid losing out on other qualified applicants you would want to hire should this prospective employee decline. Typical deadlines would give candidates at least a week to come to a decision.

Closing

End the employment offer on another positive note, showing how excited you are to welcome this potential employee to your team. You should also give them your contact information in case they have any questions for you. Finally, include a line where the candidate can sign and date your employment offer if they decide to accept.

Disclaimer

Think about adding a short disclaimer stating that the offer letter is just informational and does not constitute a legally binding agreement or contract. Again, you will want to work with a lawyer who is experienced in creating these kinds of documents to ensure you do not inadvertently use language in your letter that could carry contractual implications.

Here is an article about when an employer can legally withdraw an offer of employment.

What Happens After a Candidate Receives an Employment Offer?

After receiving an employment offer, your potential employee now has to decide if they will accept or decline the offer. A candidate should sign and return the employment offer letter as formal acceptance of the position if they decide to accept.

A potential employee has a few different options upon receiving an employment offer. They can:

• Accept the offer on the spot
• Ask for a few business days to think about your offer
• Negotiate new conditions within the terms of employment

Once everyone has agreed to the offer's terms, you can create a legally binding employment contract that explains the responsibilities and rights of both involved parties.