What's in an Employment Offer Letter?

Interview completed, job offer presented, and now, time to formalize the new job details in a written offer letter. Whether you are the hiring employer, or the employee who has just landed the job, you look over the salary, vacation, bonus, benefits, and such other items. Is the offer letter now ready to be signed? What other considerations should go into a written offer?

In many instances, the employment offer letter, once signed, becomes the employment contract. The terms and conditions will govern the new employment relationship and cannot be easily amended. The offer letter therefore can be a powerful human resources tool, if used effectively. With it, employers may manage employees a certain way, and employees may access certain perks. It pays to take care at the outset, and ensure that the offer letter is well drafted.

Here are 6 tips when reviewing and/or drafting an employment offer letter:

  1. Review the terms that govern bonuses (including other short and long term incentives). Is it effective in incentivizing the new hire? Is the bonus discretionary, or objectively measurable? For employers, consider whether bonuses may be payable to a departing employee. To the extent an external bonus plan documentation governs bonuses, how is the documentation incorporated into the offer letter, and what does the plan documentation actually say?
  2. Non-traditional work hours, flexibility, and work life balance are becoming more prevalent in offer letters to attract and retain talent. However, are the terms effective in boosting productivity, or, are they allowing employees to take advantage?
  3. To the extent extra hours worked are rewarded by way of day rates or fixed bonuses (and the like), be mindful of whether there are statutory limitations on how much an employee may be required to work, and how much rest periods the employee may be entitled to. Similarly, ensure that any overtime compensation entitlement is properly drafted, to be compliant with minimum statutory requirements.
  4. If there is a termination provision in the offer letter, is it in line with statutory requirements? For employers, it may be worth considering whether to build in "peace of mind", to minimize risks of an employee turning around and suing for more. For employees, it is recommended to learn what rights they may have in Canada in relation to termination and severance, which can be a powerful bargaining tool when it comes to negotiating this point.
  5. If the offer letter references other documents (such as policies, non-competes, and confidentiality agreements), are those documents properly incorporated as part of the offer letter? If so, the employer may benefit from such restrictive terms and conditions, and employees may be required to comply with them. Otherwise, such external documents may have no force and effect.
  6. Final detail to note: do the dates line up? For example, was the offer letter signed and returned before the actual employment start date? If not, the signed document may not be enforceable. This is a particularly critical point for employers who want to be able to rely on restrictive provisions in the signed letter. It is equally important for employees to understand the legality and validity of what has been signed.

The above is largely applicable to new hires. For employers looking to roll out new or updated employment contracts for existing employees, or employees being presented with an employment contract where none existed before, different considerations may be relevant. In all cases, for both employees and employers, be sure to speak with a knowledgeable workplace and employment lawyer. Learn the relevant business, legal, and practical considerations that go into an employment offer letter, and protect your interests.