Tuesday, March 30, 2010

The Offer Letter

Do you give actual offer letters when bringing on someone new? Of course you do. Yes, even when you've reached a verbal or email agreement, you still go through with all that old formality.

Don't get me wrong, no one should find out about an offer in an offer letter - it should have already been discussed it in detail. But the letter does make it official - like a referee with a whistle. Candidates like that. And you like that. Folks (sometimes you) forget or misunderstand what was agreed on. Not only can you use the letter to welcome your newest hire but it also ensures you are on the same page with all the details, and it prevent arguments in the future.

Here's what to include:
  • Expected start date
  • Supervisor's name
  • Job title - list exempt/non-exempt and FT/PT status
  • Primary job tasks - make sure to say these may change, expand or evolve over time)
  • Earnings (I think listing annual salary is fine, but some argue to only list earnings per pay period in - order to avoid any arguments the letter represents a contract). Stick an At-Will statement in their to cover all your bases. And definitely don't say any incentive payments are guaranteed.
  • Equity - include just the basics here, like # of options, strike price and vesting period
  • Benefits - Holiday, vacation, personal, FSA, 401(k), etc...
  • Expiration date - give a date they need to get back to you with a decision -typically this is a week, but listen to their needs and make your own call. Give time for, and encourage, discussion with family and friends.
  • Non-compete - add a phrase that by signing they are indicating they are not part of any non-compete or similar agreement that would preclude them from taking this job.
  • Contingencies: State that offer is contingent upon completion of an I-9 form as well as any other background checks, screens, or confidentiality agreements that you require employees to complete.
I know .... several of these items seem like too much. Well, they are until you have a problem and wonder how it could have been prevented. The whole thing should not exceed 2 pages and you should create a template to work from next time. Add some personal touches - like the writing about the importance of their hire, the exciting things on the horizon, or by delivering the letter via singing telegram or with a sweet present.

Did I miss anything? Do you have any offer letter success or failure stories?


  1. Hey Matt,
    Under NY law (effective from Oct, 2009), you also have to inform employees in writing of their regular pay days and if they are non-exempt, their overtime rate before they do any work for the company. They need to sign to show they got this information, so the offer letter is a great place to include this information for NY hires. This is according to Section 195.1 of the New York Labor law.
    -Rachel Y.

  2. Rachel - a much belated thanks! The offer letter would be a great place to add this!