How Do Offer Letters Differ from Employee Contracts?

If you believe you’ve found the perfect job candidate and are ready to produce an offer letter, be sure you know the difference between an offer letter and an employee contract. An employment contract is a signed legal contract between your company and the employee. Contracts are more extensive than offer letters and usually include information such as compensation, benefits, duties, and circumstances under which an employee can be terminated.

Offer letters are usually very brief and are used to informally offer a position to a candidate. Typically, the candidate and employer have already verbally discussed the job that has been offered, and the letter is sent to confirm the conversation.

To avoid any confusion between an offer letter and a contract, however, follow these guidelines when drafting your offer letter:

Statements about time periods: Avoid statements that refer to specific time periods of employment — for example, “We would like you to start on June 8, 2012.” Avoid using the term “probationary period” to describe a set amount of time in the beginning of employment.

Specifics of employment: Do not include any statements about employment such as discussions of employment benefits, bonuses, or cases where disciplinary actions or termination would occur. These are items that should be saved for the employment contract the employee signs at the beginning of employment.

Salary: Leave out any discussion of salary or any references to the employee’s weekly, biweekly, or monthly rate.

Be general: Stick to words such as “generally” or “typically” when discussing terms of employment, such as company policies. Think about what might be misconstrued as a “promise,” and avoid those types of phrases.

At will: Do include an at-will statement making it clear that either party (employer or employee) can terminate the offer at any point. The simpler the offer letter, the better. An example would be:

Dear (Name)

It is our pleasure to offer you employment at (Company Name). This offer is contingent on your passing (name any contingencies such as certain tests that must be passed, for example typing or drug tests). You may also reply with any contingencies you wish to state as an agreement of employment. Please contact our offices at your earliest convenience.

To make sure you aren’t heading down a dangerous path, it’s a good idea to get a lawyer involved. Have an attorney look the offer letter over to be sure your wording makes legal sense and isn’t binding.