what is an offer letter?
An offer letter is a written document an employer sends to a candidate after they have been selected for an open job position. The candidate has the right to accept or reject the offer letter.
why is an offer letter important?
As an employer, you should provide an offer letter to a successful candidate for various reasons:
- It acts as a legal document you can use for future reference.
- It communicates your expectations from the role to selected candidates.
- It enables you to keep everything on record and meet compliance.
- It provides the candidate with a basic understanding of the role, compensation structure, organisational culture, and employment policies.
what does an offer letter contain?
Regardless of the format, your offer letter should contain the following details:
- Job title: Ensure the job title matches what you communicated when advertising the vacancy.
- Joining date: Specify the date on which you expect the selected candidate to join the organisation.
- Compensation structure: Provide the details of the salary without any ambiguity. If the compensation includes variable pay, you should give the breakdown between fixed pay and variable pay.
- Employee benefits (if any): Offer information about employee benefits such as insurance, leaves, reimbursements, subsidised meals, transportation, and so on.
- Working hours: Clearly state the job’s start and end times.
- Probationary period (if any): Mention how long the candidate will be on probation.
- Documents required: List all the documents the candidate will need to submit to the HR department on or before their first day.
- Organisational compliance policies: List all the organisational policies such as code of conduct, non-discrimination, health and safety, privacy, data protection, social media usage, and more.
Depending on the job role, you might also like to include additional details such as the position of the reporting manager, confidentiality and disclosures, background verification, medical checkup, etc.
cancelling and revoking an offer letter.
You can cancel the offer letter before the candidate accepts it without much issue. However, cancellation after the offer is accepted might lead to legal consequences.
If you have given the candidate a conditional job offer, you can cancel the offer letter with a valid reason such as:
- The candidate didn’t pass the background verification.
- They did not join the company on the agreed-upon date.
- Their references indicated they are not fit for the job.
- They failed to submit the proof of qualifications.
- They have a criminal record.
negotiating an offer.
It’s normally good practice to only send an offer letter once you have reached verbal agreement on the details of the offer with your new hire. If a candidate wishes to negotiate, listen to their concerns with an open mind and see if you can match their expectations. If you feel the candidate is worth the additional salary or perks, there’s no harm in getting them on board by agreeing to their requests.
Here are the best practices for navigating offer negotiations with candidates:
- Establish a salary range for each job while developing the job description. If the candidate’s expectation falls within the salary range, you can immediately make a decision.
- Offer non-cash benefits such as stock option plans if possible, a reduced fitness membership, free snacks and beverages, vacation, health benefits, and flexible working hours. This can help motivate the candidate to accept the offer. For instance, according to Gallup, 51% of employees would switch jobs that allow them more flexible working.
- Consider variable benefits: Think about providing successful applicants with a signing bonus, performance commission, and other variable benefits.
write offer letters carefully.
You should be cautious when you’re writing an offer letter. Since it’s a legally binding agreement, you’ll need to abide by everything you state in the letter. Consider every detail you include and how they can impact both the organisation and the employee.
Here are the two common mistakes you should avoid while writing an offer letter:
- Using overly technical/legal language that you don’t fully understand and could get you into contractual obligations you don’t want to establish.
- Not having an expiry date for the offer letter. Expiry dates will help you avoid unwanted delays from potential candidates in accepting the job offer.
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