When recruiting new employees, you might use the terms “offer letter” and “employment agreement” interchangeably. However, there is a big difference between the two. You generally create a verbal offer and follow up with an employment letter — but extending an initial verbal offer to your top candidate should never be a legally binding employment agreement.
Why? Offer letters are usually sent before some pretty serious legal stuff is taken care of — like a background check — and it gives more details about the open role and your practice to help your candidate decide whether or not to accept the offer. However, the offer letter is a totally different HR document than the employment agreement you send after the applicant goes through a few pre-hiring checks… and you don’t want to accidentally send an offer letter that’s an employment contract, right?
Differences Between Offer Letters vs. Employment Contracts
An offer letter is used to give a job offer to a potential new hire. If accepted, they will then officially join the company by participating in your onboarding process. That’s where they typically select their benefits package and learn the ins and outs of your practice.
On the other hand, an employment agreement (sometimes called an employment contract) can be a legally binding document that goes into more detail about the terms and conditions of your potential hire’s employment — meaning it’s more explicit and lists the full conditions of employment.
An offer letter should never include:
Writing an Offer Letter That Avoids Employment Contracts
Give Basic Information at the Start
Provide Information Regarding the Job
List Paid Leave and Benefits
Offer Terms of Employment
Make It Clear That This Is “At-Will Employment”
The most important thing to keep in mind?
Keep Your Offer Letters Simple.
When reaching out to your potential hire, you want to stand out and remind them why they chose your practice to apply with. It’s pretty likely that they applied for a lot of other positions by the time you’ve interviewed with them. In your excitement to snag an amazing, new employee, though, it’s important that you don’t turn your offer letter into any kind of binding contract.
Remember, An Offer Letter:
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