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Its (Not) Just an Offer Letter

November 5, 2024 by in Blog

An offer letter is a document that a business owner releases to a candidate as a letter of intent to hire them. Before we dwell into the why and what of an offer letter, let us see why a business owner might avoid giving one.

Why do business owners refrain from releasing an offer letter?

Often, business owners feel an offer letter will be misused: a candidate will use the letter to get a better offer in the market. I frequently, hear owners complain that a candidate did not join after taking the offer letter. Let me clear this myth: candidates not joining after receiving an offer letter is mutually exclusive from the act of releasing an offer letter. There are several reasons for this, but it is a discussion I leave for another blog.

Let us now look at:

Why is it important to provide an offer letter?

As a business owner what do you want:

  • A candidate makes an informed decision of joining us, after weighing all their options and finding your offer a step up in their career.

Alternately, a candidate joins without fully understanding the proposition or with an intention to test waters or because they have a lack of opportunities due to lack of skills.

In light of this, here are my reasons for why releasing an offer letter is a must:

Reflects on the company

  • A formal communication like an offer letter builds credibility of the organization.
  • It builds transparency with regard the salary structure and commercial expectations.
  • It’s a gratifying experience to receive a formal offer: it builds a sense of security in the person joining. People even celebrate the receipt of an offer with friends and family like you would celebrate an awaited business contract.

Reflects on the candidate

  • It provides opportunity for the candidate to discuss terms of employment before joining: if the candidate negotiates the offer, it gives an insight into their real personality, negotiation skills, communication skills, and ability for teamwork.
  • Candidates with maximum questions on the offer are found to be better decision-makers and positive about the opportunity when they join. Candidates who join without an offer letter are mostly joining out of desperation for a job rather than thinking about the career opportunity with your organization. 

Prepares the candidate

  • It gives clarity to the joinee regarding the role and working conditions.
  • It affords a chance for mental preparedness by the candidate before taking up a new challenge

Finally, what details should an offer letter cover?  

A cover letter should state the following

  • Designation of the new hire
  • Department to be joined
  • Working Days
  • Working Hours
  • Annual Leaves
  • Salary Break-Up
  • Statutory Benefits (PF, ESIC, Gratuity, Bonus)
  • Joining Date
  • Variable Bonuses
  • Job Role of the new hire

I hope you are convinced about the importance of an offer letter now. You may also appreciate that writing it is no small task. You need to have your HR policies for leaves and salary in place as well as a clear organization structure to write a complete, comprehensive offer letter. You can watch this video to know more: https://youtu.be/KqgjZWOTYbw?si=1mUfd5dNpgWWfrhF

We are here to help you with HR policies and offer letters! To book a consultation, just leave a comment.

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