Employment Agreement vs Offer Letter - Which One is Better?

i hear it all the time what's the difference between an employment agreement and an offer letter well stay tuned hi entrepreneurs i'm vicki brown and you're in the right place if you want to engage your team boost your business and grow your leadership muscle so employment agreement and offer letter aren't they just the same thing well actually no while i know people often use the terms interchangeably they're actually two drastically different documents and they hold different obligations for you as the employer because for the most part in the u.s most employees are considered at will meaning they can resign or be terminated at any time but one circumstance that can be a fly in the ointment is if they're under an employment agreement now generally speaking an employment agreement or employment contract is a binding promise between the employer and employee and it explicitly lists the conditions of employment and termination of employment now in most cases an employment agreement is going to wipe out the at will status and that puts more pressure on you if you decide things aren't working out you'll be bound by the termination clauses of the employment agreement an offer letter on the other hand specifically upholds the at will status and simply confirms the terms of employment that were made verbally they are not contracts and most times they're going to say so and they don't bind the employer to continued employment also offer letters don't make any type of promise about continued employment so what goes in an offer letter well first you state that you're confirming the offer of employment what the job is who it reports to and where it's going to be located then confirm the start date and provide a very general paragraph outlining the job duties next up is the compensation whether it's annual or hourly one pro tip here always use the word annualized because you aren't guaranteeing a whole year's salary if they leave early you're going to prorate it so the term annualized will make sure that there is no confusion in this part of the letter state all forms of compensation so if you have a bonus program or signing bonus add all that in remember the purpose of the offer letter is to provide clarity so try to include all the important facts next it's nice to do a general blurb about the company's benefits however do not try to spell out the benefits program in the offer letter benefits are governed by contracts with your insurance carrier and they have a slew of documents with carefully worded information around what is and isn't part of the offerings under no circumstances do you want anything in the offer letter to contradict those documents so keep it very general we always recommend you add in a statement that you fully expect the new employee to abide by any obligations to their prior employer so if they have a non-compete which by the way is not valid in california but it is in other states you are stating that you expect them to uphold those obligations mention that you have company rules and regulations and you expect them to abide by those as well and mention if you have any other documents you expect them to sign like inventions or confidentiality agreements then comes the all-important at will statement and the sign off now i know many times people like to include information about things like vacation and other time off if you do want to add in that language be sure you have disclaimers stating that the company can change those policies at any time you don't want to be locked into a vacation policy that just is no longer applicable so see a properly worded offer letter can provide all the employment confirmation you need to start a new employee hold off on the employment agreement for your c-suite level hires if you found this information helpful please subscribe and share and if you're struggling with how to get your business off the ground check out the leader's journey business builder i designed this completely free video series to help you with figuring out who your customer is and where to find her how to sell without selling how to package and deliver your service and much much more check it out by using the business builder link below in the description and remember your inspired leadership well that's the secret sauce to having a high performance team and a wildly successful business you'll love i'll see you next time on leaders journey you

Channel: Vicky Brown - Leader's Journey

Views: 797

Rating: 5 out of 5

Keywords: Vicky Brown, Leaders Journey, Leader’s Journey, Leaders Journeytv, Leader’s Journeytv, Idomeneo Enterprises, Idomeneo Inc., Idomeneo, Human Resources, Employment agreement, Offer letter, New Hire documents, Employment contract, Employee agreement

Id: fTQO-kjQvlY

Length: 5min 5sec (305 seconds)

Published: Thu Dec 10 2020