The Importance of Offer Letters
Offer Letters play a critical part of the recruitment and employment process, particularly in the absence of an Employment Contract, where the details included in the offer letter form the basis of a binding contract. Whilst the Offer Letter may be perceived as an informal document to offer a position to a candidate, employers need to be mindful that they are a written agreement between the employer and employee.
As well as being an opportunity to welcome your new team member onboard, it is a contract and as such, needs to be clear with no grey areas. Without a contract, both employer and employee leave themselves exposed to disputes and misunderstandings, therefore rather than naively drafting an informal letter, employers are urged to see it as an opportunity to provide clarity.
What are the essential points to cover in an offer letter?
You must get the offer letter right from day one for both parties. For an Offer Letter to be legally binding it must outline the terms and conditions of employment, the remuneration for the position and request consent from both parties. Not only will this start you off on the right foot, it will all also mean that there are no surprises for either the employer or the employee.
Some of the inclusions are obvious but it can be easy to miss one so make sure you have prepared a standard template to avoid omissions. Lay out your letter clearly. This can be as a table so it’s easy to read. Make sure you list the following (unless not applicable such as uniforms, salary sacrifice etc.):
- Employee name
- Start date
- Job title
- Status (salary/wages, full-time/part-time, the award and the classification)
- Reporting manager
- Agreed annual salary including any additions such as mobile phone or vehicle contributions
- Annualised salary arrangements and reconciliation
- Timesheet requirements
- Salary payment and review
- Salary sacrifice
- Bonus/incentive information
- Location of job and details of any travel
- Drivers licence requirements (if applicable)
- Ongoing obligations
- Qualifying period
- Acting in the employer’s best interest
- Workplace health and safety
- Restraints of trade (if any)
- Outside employment
- Tools of the trade
- Client’s request of disengagement of services
- Employee handbook
- Use of employee name and stationery
- Conflicts of interest
- Social media and media
- Pre-existing injury or illness
- Email and internet use
- Drug and alcohol testing
- Fair work information statement
It is also essential that you have a call to action so that the employee knows what to do next. For example, if this is the basis of their employment agreement with you, they should sign and return the form within a set number of working days. There may be other documents included with the offer letter that they will need to acknowledge that they have read and also, that they have the legal right to work within the country and the skills to complete the tasks.
Make sure as well as a signature, that the employee has dated when it was signed. Similarly, ensure the letter from your company has a date on it and that the responsible member of staff who is making the offer, has also signed it. Leave space at the bottom of each page so the offer letter can be initialled.
Typically, the offer letter will be forwarded in duplicate so one copy is kept by the business, and the other by the new team member.
What makes a bad offer letter?
If you’re an employee and you receive an offer letter that doesn’t contain the majority of the key information discussed, this will leave you exposed. Make sure you clarify with your employer any areas of concern and request that the offer letter is revised. Remember, this is a legal document so starting off on the right foot will give you peace of mind that you are embarking on a role at a professional organisation.
For employers, we suggest consulting with an HR specialist and employment lawyer to ensure you have covered all your obligations. Make sure you review your offer letter templates at least once every few years as the law does change, as will your business.
Employees shouldn’t need to speak to a lawyer before signing an offer letter however, if it is a senior role (above $150k) or involve anything complicated, it would be wise to get legal advice.
We know some businesses may not have the resources available to obtain employment contract advice, but there are a wealth of resources online such as Letter of Engagement templates from Fair Work Australia. You can also call them and speak to someone in person if you have specific questions which aren’t covered online.
What about personality? Does the offer letter have to be all fact and no warmth?
Whilst the offer letter is a serious document, it is also a good opportunity to add in a personal welcome greeting but keep this at the start and end of the letter. Make sure it’s brief but genuine. The bulk of the letter must clear and not open to interpretation. Keep the facts in the middle and remember, it is a contract.
Remember that the Offer Letter may be referenced in any disputes should an issue arise.
When do I send an offer letter?
Always make sure you’ve made a verbal offer first either face to face, or over the phone. This is so there are no surprises. It could be the case that the candidate has changed their mind and has more questions, or that they didn’t think they had been successful if there is a longer than expected gap between the interview and the offer.
This is also an opportunity to demonstrate the warmth and personality we discussed previously. A verbal offer should never replace a written one, so make sure you explain that a formal offer letter with all of the employment details, will be sent immediately. This is fine to forward via email, or hard copy in the mail if you prefer.
Can I quit my current job once I have a verbal offer?
If you are an employee who has been offered a job verbally, do not resign from your current role until you have read, signed and returned the offer letter in case something changes. Whilst not ideal and certainly not best practice, it is possible for circumstances to result in the job no longer being available before you’ve even set foot in the door.
The onboarding process starts from when the offer is made, which means the probation period also commences, not on the first day at work as some may think. What this means is that even though you have a formal offer, both employer and employee can terminate the contract under the probation clause before the first day. This is the most critical stage and why it’s vital to have all of the information set out in detail.