An offer letter spells out the terms and expectations for an employment relationship between a company and a candidate. After the hiring manager and candidate have come to a verbal agreement for an offer, it’s time to put everything in writing.
As a final step in the recruiting process, it is absolutely critical that your company gets the offer letter right. There should be no surprises for the candidate, and the letter should be 100% clear. This article features an offer letter checklist with nine essential elements to include in every offer letter.
Note: This article is not intended as a replacement for legal advice. Please consult with your company’s legal department for additional guidance.
1. A warm welcome
The majority of an offer letter should outline the terms for employment. However, it’s also important to start and end an offer letter by warmly welcoming the candidate to your organization and by reinforcing the value proposition for the role. For example, your letter could begin with something like the following: “It is with great pleasure that we extend you this offer to join our company as a full-time employee in the position of __________ (insert the title for the role). This is a very exciting time for __________ (insert your company’s name). We are confident that you will be able to make a significant contribution as we continue to strive to __________ (insert the mission of your company and/or the role).”
2. Basic job information
This includes the type of employment (i.e. full-time vs. part-time), exempt vs. non-exempt status, the title for the role, the supervisor for the role, the location for the role, the work schedule/hours, and the start date.
3. Compensation
This includes the annual base salary, any short-term incentives (i.e. bonuses or commissions), and any long-term incentives (i.e. equity). You should also state how the incentives will be earned (i.e. a one-year cliff and four-year vest for equity) and when the various forms of compensation will be paid (i.e. biweekly for base salary and monthly for commissions).
Finally, if your company offers a 401K program, the terms for that should be noted as well. That includes when the employee will be eligible for the 401K program, what the company’s current policy is on 401K matching, and how the company’s 401K contributions will vest for the employee.
4. Health insurance and other benefits
Indicate if the employee will receive company-subsidized health, vision, and dental insurance, along with any other kinds of insurance (i.e. short-term disability insurance) or benefits. Be sure to include when the employee will be eligible for these benefits. A more detailed overview of your company’s benefits can also be attached with the offer letter.
5. Noteworthy perks
If the candidate will be eligible for any other perks that are significant, make sure to note them in the offer letter as well. For example, maybe the person will be eligible for tuition reimbursement, executive coaching, free club memberships, relocation assistance, free on-site parking, paid family leave programs, on-site day care, or access to corporate housing.
6. Vacation schedule and PTO policy
Indicate how many paid holidays are offered per calendar year, how the employee will accrue PTO (i.e. 2.3 hours of PTO per pay period), and how many days of PTO the employee will receive per year. You can also include your company’s terms for unused PTO and if it rolls-over or is subject to a “use it or lose it” policy.
7. Conditions for the offer
This includes any terms which the offer is contingent upon, such as a background check, reference checks, drug testing, or the employee providing proof of their legal right to work in the U.S. If the candidate will be asked to sign a non-compete agreement and/or a confidentiality and non-disclosure agreement, it can be included as an attachment with the offer letter. Or, it can be mentioned as a condition in the offer letter, and then shared on the candidate’s first day of work (when the candidate will be asked to sign it).
8. An at-will clause
If the employment will be “at-will,” the offer letter should indicate that the company or the employee can end the employment relationship at any time. For example, you could write something like the following: “This offer is not considered a contract guaranteeing employment for any specific period of time. As an at-will employee, both you and __________ (insert company name) have the right to terminate your employment at any time, for any reason, and with or without cause or notice.”
9. A gentle deadline
Assuming that the hiring manager and candidate already agreed verbally to the terms in the offer, you can ask for the candidate to sign the letter within 24-36 hours. (If you have not yet reached verbal agreement on the terms for the offer, read this article, and hold off on sending the offer letter until you do.)
So, if the letter is sent to the candidate on Thursday morning, you can ask for a signature by 5:00 p.m. on the following day (Friday). For example, include some language like “We would appreciate receiving a signed copy of this letter by 5:00 p.m. on ______ (insert the date after the letter is sent to the candidate). Please sign and email this letter to __________ (insert email address for the hiring manager) as your acknowledgment and acceptance.”
P.S. Looking for more help with your company’s executive recruiting efforts?
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About the author: As the Founder of Stronger Talent, Pete Leibman recruits exceptional leaders for innovative sports, fitness, and wellness companies. Throughout his career, Pete has helped clients recruit exceptional leaders at the Board, C-Suite, Senior Vice President, Vice President, General Manager, Managing Director, and Director levels. Pete’s work has been featured on Fox News, CBS Radio, and Fortune.com, and he is the author of two books and over 250 articles on career management, peak performance, and executive recruiting.
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