So you found the right candidate to bring on to your team (congrats!), now it’s time to prepare and send out the offer letter. At Betts, we receive a lot of questions about what goes into writing the ideal offer letter so we wanted to break it down.
Firstly, we wanted to give a quick disclaimer. The information provided is for general guidance and not intended as legal advice. Betts advises to consult with legal professionals for advice and to verify information before making decisions. We take advice from organizations such as Law Insider and we recommend you find a trusted source to refer back to.
The Most Important Details
Before we get started, let’s get into the purpose of the offer letter which is to lay out the terms of employment so the candidate can formally agree to accept the position. It should include clear and concise details about job title, hiring manager, location, start date, duties, salary, equity, reimbursements, employee benefits, employment terms, and other legal considerations. All of these details may have been discussed prior to or at the time the verbal offer was given, but it’s crucial to include everything in writing.
The offer letter should essentially outline what to expect in the role as well as what’s expected in case of employee termination. It’s important to keep in mind that this letter is the last thing a potential new hire will read before committing to work at your company so it should possess a positive yet professional tone.
Now let’s dive into the details:
Format
This goes without saying but the format of the letter should include the company logo, date that the letter was sent, and subject (Re:Offer of Employment). The letter should be directly addressed to the candidate and personalized depending on job title & position. It should include an introduction followed by a breakdown of the job details, conclusion, signature of employer and acknowledgement & acceptance of the offer which the employee will be able to sign.
Introduction/Personalized Greeting
The first thing that an offer letter should start with is a personalized greeting that formally offers the position to the candidate with the job title and location clearly specified. It typically lays out what the rest of the letter would entail which includes logistical details about the job along with terms and conditions and request for signature that will signify the formal acceptance of the position.
Example:
Dear [Employee First Name]:
On behalf of [Company Name] Inc (the “Company”), I am pleased to offer you the position of [JOB TITLE] located in [CITY]. This letter sets forth the terms and conditions of your employment with the Company. It is important that you understand clearly both what your benefits are and what the Company expects of you. By signing this letter, you will be accepting employment on the following terms.
Job Details & Employment Terms
- Start Date & Job Duties
When laying out the terms and conditions, the first section should outline when your new hire is expected to begin working at the company and all of the specifics of the role. This includes the job title, who they will report to, responsibilities and type of position (full-time, contract, etc.). This can be separated into two sections titled “Effective Date” and “Duties” which is outlined below:
Example:
Effective Date. Your employment will commence on [MM/DD/YYYY] (the “Effective Date”).
Duties. Your job title will be [JOB TITLE], reporting to [HIRING MANAGER NAME: FIRST, LAST], [HIRING MANAGER JOB TITLE]. Your duties generally will be in the areas of [DUTIES EXPLAINED], but you may be assigned other duties as needed. This is a full-time position.
- Compensation, Incentive Compensation & Reimbursement Expenses
This may feel obvious but it’s still important to note that the salary should be clearly stated in its own section. It should also include any information about payroll terms and the eligibility to receive a raise. If the role includes an incentive compensation plan, the goals and expectations that need to be met in order to receive such bonuses should be outlined. You should also be explicit if this incentive plan is subject to change. Additionally, the reimbursement policy within the company should be detailed here within its own section. These sections can be split into 3 terms (“Compensation”, “Incentive Compensation” and “Reimbursement Expenses”).
Example:
Compensation. This is an exempt position and you will be paid [$XX,XXX] yearly in accordance with the Company’s normal payroll procedures. Subject to the Company’s current annual performance review process, you may be eligible for an increase of your base compensation.
Incentive Compensation. You will be eligible to participate in annual performance bonus plans established by the Company from time to time for similarly situated employees, subject to the terms and conditions established by the Company for such bonus plans. Any such bonuses will be based on the achievement of goals and milestones established by the Company in its sole discretion, and the Company in its sole discretion may amend or terminate any such bonus plans at any time.
Reimbursement of Expenses. All reasonable business expenses that are documented by you and incurred in the ordinary course of business will be reimbursed in accordance with the Company’s standard policies and procedures.
- Equity/Share options
If your company offers any equity or stock options, this is where the specifics should be listed out. This clause typically includes how many shares the employee is granted along with details about the vesting schedule. If there’s a separate document they’ll receive in regards to their equity, the name along with those details should be referred to in the letter.
Example:
Stock Options. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase [XX] shares of the Company’s Common Stock (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 and will be equal to at least the fair market value of the Company’s Common Stock as of the date of grant. The Option will be subject to the terms and conditions applicable to options granted under the Company’s [CURRENT YEAR] Stock Option and Grant Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreement to be signed by you and the Company. The Option will be immediately exercisable, but the unvested portion of the purchased shares will be subject to repurchase by the Company at the exercise price in the event that your service terminates for any reason before you vest in the shares. You will vest in [PERCENTAGE] of the Option shares after [NUMBER] months of continuous service, and the balance will vest in equal monthly installments over the next [NUMBER] months of continuous service, as described in the applicable Stock Option Agreement.
- Benefits
Depending on what type of benefits the company offers, this section should include everything the employee is eligible to receive. This includes health benefits, holidays, and any other ones the company may offer. If any of these benefits are subject to change at some point, that should be stated to prevent future legal disputes.
Example:
Employee Benefits. You will be eligible to participate in Company-sponsored benefits, including health benefits, holidays and other benefits that the Company may offer to similarly situated employees from time to time. Your eligibility to receive such benefits will be subject in each case to the generally applicable terms and conditions for the benefits in question and to the determinations of any person or committee administering such benefits. The Company may from time to time, in its sole discretion, amend or terminate the benefits available to you and the Company’s other employees. You will be covered by worker’s compensation insurance, state disability insurance and other governmental benefit programs as required by state law.
- Employment Terms (At-will Employment)
Essentially, this section explains that both the employee and company have the right to terminate their employment at any time, as long as it’s not for an illegal reason. Most states across the United States are at-will. If your company has a probationary period for employees, this is the section where that should be specified.
Example:
At-Will Employment. Your employment with the Company is “at-will.” In other words, either you or the Company can terminate your employment at any time for any reason, with or without cause and with or without notice, without liability except as expressly set forth in this letter. No representative of the Company has authority to enter into any agreement contrary to the foregoing “employment at will” relationship.
- Changes in employment status
This condition highlights that the company is within its right to make decisions that could change the employees position, duties, compensation, benefits along with company procedures and policies. This would ultimately help protect the company if there are internal changes that arise after the employees start date.
Example:
Adjustments and Changes in Employment Status. The Company reserves the right to make personnel decisions regarding your employment, including but not limited to decisions regarding any transfers or other changes in duties or assignments, changes in your salary and other compensation, changes in benefits and changes in Company policies or procedures.
- Proprietary Information
In order to protect the company’s proprietary information, this clause will cover that anything that is created by the employee during their time of employment is owned by the company. This prevents the employee from being able to use this information outside of the business.
Example:
Proprietary Information Agreement. You will be required to sign and abide by the terms of the enclosed Proprietary Information and Inventions Agreement prior to beginning employment, indicating your full agreement to, and ongoing compliance with, the terms of that agreement, which include, among other provisions, the assignment of patent rights to any invention made during your employment at the Company, and non-disclosure of the Company’s proprietary information.
- References and Immigration Status
When an employee accepts an offer, they need to be able to legally work at the company. Therefore, this section should just explain that the offer is valid only if the employee passes their background checks and their identity and immigration status is confirmed.
Example:
References and Immigration Documents. This offer is contingent upon satisfactory completion of all of our reference and background checks, and on your ability to prove your identity and authorization to work in the U.S. for the Company. You must comply with the United States Citizenship and Immigration Services employment verification requirements.
- No Conflicting Obligations
This piece details that the employee agrees not to work at or with any other company that competes with the business and disclose any prior obligations the employee has made that might violate any of the terms and conditions of employment. Essentially, this explicitly outlines that the employee should not have any obligations that will breach the employment agreement listed out in this letter and also agree to not disclose any information to third-parties that may conflict with the company.
Example:
No Conflicting Obligations. By execution of this letter, you represent and warrant that your performance of this letter does not and will not breach any agreement you have entered into, or will enter into, with any other party. You must disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. Moreover, you agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting, or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. Similarly, you agree not to bring any third-party confidential information to the Company, including that of any former employer, and that you will not in any way utilize any such information in performing your duties for the Company. By signing and accepting this offer, you represent and warrant that: (i) you are not subject to any pre-existing contractual or other legal obligation with any person, company or business enterprise which may be an impediment to, or a conflict of interest with, your employment with the Company, or your providing services to the Company as its employee; (ii) you do not have and shall not bring onto the Company’s premises, or use in the course of your employment with the Company, any confidential or proprietary information of another person, company or business enterprise to whom you previously provided services; and (iii) you will not, at any time during your employment with the Company, breach any obligation or agreement that you have entered into with any third party, including your former employers. You agree not to enter into any written or oral agreement that conflicts with this letter.
- Integrated Agreement
This clause explains that whatever is agreed to in the letter is final. For example, if there was anything that was agreed to prior to the offer letter being sent out, an integrated agreement clause states that the offer letter is the final word.
Example:
Integrated Agreement. This letter supersedes any prior agreements, representations or promises of any kind, whether written, oral, express or implied between the parties hereto with respect to its subject matter. Likewise, this letter will constitute the full, complete and exclusive agreement between you and the Company with respect to its subject matter. This Agreement may only be changed by a writing, signed by you and an authorized representative of the Company.
- Severability
In order to protect the integrity of the entire agreement, this clause states that if anything within the agreement is not met, the rest of the agreement still remains. It prevents the entire employment agreement from becoming null and void if one condition is not met.
Example:
Severability. If any term of this letter is held to be invalid, void or unenforceable, the remainder of the terms herein will remain in full force and effect and will in no way be affected, and the parties will use their best efforts to find an alternative way to achieve the same result.
- Governing Law
This section clarifies which state or jurisdiction the laws will apply to if there is a future dispute about the contract. This is important for companies who may be headquartered in different states than one where the potential new hire resides.
Example:
Governing Law. The terms of this letter and the resolution of any dispute as to the meaning, effect, performance or validity of this letter or arising out of, related to, or in any way connected with, this letter, your employment with the Company or any other relationship between you and the Company (a “Dispute”) will be governed by the laws of the [STATE/JURISDICTION WHERE COMPANY ABIDES BY] , without giving effect to the principles of conflict of laws. You and the Company consent to the exclusive jurisdiction of, and venue in, the state or federal courts in [STATE/JURISDICTION WHERE COMPANY ABIDES BY].
Conclusion
The concluding sentence can be kept brief and only include an expiration date of the offer letter. This is important so you can ensure the employee has a clear deadline on when they’ll be able to accept the offer. It should be followed by employer signature and a request for employee signature to acknowledge and accept the offer.
Example:
This offer letter expires on [Expiration Date: MMMM DD, YYYY]
As a reminder, none of the information provided in this blog should be taken as legal advice on behalf of Betts Recruiting. Download the template for your own offer letter here.
Contact Betts to help get those new hires in the door and those offer letters sent out.