VANNOY:
Best practices to write a compliant job offer. Hi, I’m Mike Vannoy with Asure, and this is one of those things that we talk about compliance, we talk about HR law. This is almost an oxymoron kind of a title because there is no legal requirement to even have job offers, written job offers, let alone what’s contained within them. But we see employers get in trouble every day from either not doing them bad expectations or putting bad stuff in them. So we really want to make sure that everyone understands the best practice and what they should and shouldn’t be doing. So get the perfect guest for this if you’re a regular attendee of the show. Mary Simmons Mary is our Vice President of HR compliance at Essure. She’s ASH RM certified professional, and for the last eight years, Mary has been an adjunct professor at the New York Institute of Technology. Prior to Asure Mary was the director of HR consulting for a 58 year old HR consulting firm in New York. Welcome back to the show, Mary.
SIMMONS:
Thanks, Mike. Happy to be here.
VANNOY:
All right. So when a lot of people know about the survey, the HR Small Business HR Benchmark report, we did with the survey of over 2000 small businesses, and this was one of the topics we discussed, so I’m going to cite from the study. So over 2000 small businesses revealed that one in three companies that failed to grow. So these are the down year firms. They don’t send written job offers that include pay rate, pay frequency, lead benefits, and at-will employment, but 83% of fast growth companies do. So this is one of those areas, this is one of the questions that really popped out that the fast growth companies, they do this well in the down year companies not so much, and so it may not be a perfect correlation. We realize you could do HR perfectly and still have a rough year for any number of reasons, and HR doesn’t guarantee success, but this is one of those clear questions that the highest performing fastest growing companies in the United States, they do this right, and the companies, they’re shrinking on average. So maybe Mary, can you just before we start talking, what do you put in what, don’t put in just comment on this that it’s not legally required, but why should we do this?
SIMMONS:
So that’s a really good point and I’m glad you brought that up. Look, we always talk about the war on talent. So number one, this gives a very professional appearance to your candidates soon to be new hires. And look, if I was applying for a job and one organization is like, yeah, yeah, just come in on Monday, I’ll see you then maybe mention the salary, but I’m not really sure what it is and other details. And another company gave me this beautiful offer letter. I think I’m going to go with the company who gave me the offer letter. They seem more organized, they seem like they really want me to work for them, and that’s going to be a differentiator for the candidates that we have. I think beyond that, we always want to set expectations. So you want to tell people right upfront some of the key things about their employment, even if you said what their benefits are, people are nervous when you give the job offer. They might not be taking notes, et cetera.
I’ve had employers have people come to onboarding and go to sign up for the benefits or have the benefits explained to them and then go, wait a minute, it’s that much money I’m not joining. And so a lot can be missed when you make that verbal job offer set expectations, show that you’re a professional organization. It’s just very important to have this. Great. We talked about a strategic HR function in past conversations. This is strategic. This sets you up like a professional organization and gets that employee to understand all that they’re going to get as a new employee.
VANNOY:
Mary, sometimes I think we forget that as a boss or an employer, we’ve probably hired people many times in our careers. I mean certainly there’s early days, it’s the first few times you do it, but after a while, if you’ve been a business owner for a number of years, people come and go and you’ve probably hired lots of people. We forget that the average employee, I mean an employee who stays in a job for call it three, four, five years, they may only do this two or three or four times in their entire lifetime, their entire career. We have a lot of repetitions at offering jobs and think. And so we think we’re great at explaining everything. But on the other side of the table, if this is only the third job they’ve had in the last decade, this is new to them. So like you said, whether they’re nervous or not taking good notes or they just might not even know the questions to ask until after they verbally have agreed, and then it’s the weekend. It’s like, wait a minute, where do I show up? What was it about the benefits?
SIMMONS:
What job did I
VANNOY:
Asking all these questions? And I’m like, well, I never thought to ask about that. Right?
SIMMONS:
So
VANNOY:
If for nothing else, it’s just good communication and you and I talk about this all the time about just how important communication is, right? I
SIMMONS:
Think one thing I would add, Mike, and I know this happened at an unnamed bank that I used to work at, is the last conversation they may have been with a department person versus an hr, somebody that’s in hr, and that person could have guessed at some of the information, well, I think the benefits are this, or I think the salary is this and given out some wrong information. So this should be controlled by the people who really have the information so that it is a hundred percent correct.
VANNOY:
That’s right, that’s right. And I’ll go so far as to say that’s why you should have somebody either from HR and if you don’t have an HR department, somebody that represents the HR perspective to set these kinds of expectations. I mean, I’ve had dozens of people over the years ask me during an interview, Hey, so what about your benefits? I’m like, I don’t know. I go to the doctor once every five years. I don’t know. I don’t know anything about my own insurance just because I don’t exercise it right? I’m like, let me have you talk to the person who actually is going to answer your questions intelligently. So it’s important to leverage the resources so they get the right information.
SIMMONS:
Agreed.
VANNOY:
Anything else you want to say on the importance and why you should even have an offer letter? Have it written before we jump into the do’s and don’ts?
SIMMONS:
I think once we start getting into the details, I think it’ll be pretty clear.
VANNOY:
Maybe a bridge question. I think it will apply to a do or don’t. Does it have to be paper? Does it have to be a letter? Can it be an email? What’s your guidance on the medium in which you deliver this offer letter?
SIMMONS:
I mean, I don’t think anybody’s using snail mail right now, but I guess there are some industries, maybe a high service industry might say, Hey, we send thank you notes out through us, mail a hard copy to individuals, but for time and assurance that the individual gets it, I think the majority of these are being sent out through email with an e-signature on them. I think in rare instances it’s sent out through email, asked to be printed out and then signed and sent back. I’m all about making it really easy for your candidates. I had somebody reach out the other day and say to me, can you help me apply through this system? Anything you make hard for a candidate, they’re just going to walk away. So many other positions out there, they’re going to go, that’s too hard or I don’t understand that, et cetera. So for my money, I would do email with IT reader receipt and e-signature to make it super easy for your candidates. And I know some of our small businesses may not have that capability so they can simply email it and ask them to print it and bring the signed copy with them, whatever makes sense for your organization. But I think you want to get it out in a timely manner.
VANNOY:
And I realize we’re a geographically dispersed company. We are digital first. So it might even sound like a silly question to somebody in a company like ours, but I mean my wife’s work, it’s a brick and mortar. People show up face-to-face for an interview. They perform the work. It’s not an industry. You can work for virtual and there is an expectation of paper, and I think the people who send good offer letters today, they may be watching this show wanting some best practices, what to include, not include I think others attending today. It’s like just the word letter. It’s an offer letter. Well, okay, it’s a word doc or that you perhaps put in APDF and send an email. I just want everybody to understand it’s just a way to document communication and expectation setting. Is that fair?
SIMMONS:
I love that. That’s so perfect.
VANNOY:
Yeah. Yeah. Okay, so let’s jump into it then. Mary. What? And maybe I think it’s easier almost to start with what not to put in a letter because I think that’s probably where folks get in trouble more often.
SIMMONS:
You are so right. So I’m going to tell you some stories. I’ve got lots.
VANNOY:
So
SIMMONS:
I will tell you that we were supporting an employer unbeknownst to us, we just started with them. They had been sending offer letters that said, we can’t wait for you to stay with us forever, Mike, this is a family and you’ll be here forever. Now, on the outside of that, it sounds like a lovely culture and an organization that you may want to join. Unfortunately, shortly after a new employee got that offer letter, they were put on a PIP and shortly after that terminated and then they took that offer letter to it, an employment attorney and said, but they said I’d be employed forever
And they had to cough up some money. So really I love a culturally fit comment to be included in that offer letter. Please don’t make any promises on that offer letter of how long employment is going to be. You just don’t know. You should add an at will statement that it’s at will. Now, there are some employee relationships that are not at will. So obviously for those we would not add that. And I always add that this does not constitute an employment contract, so at will and not a contract. Now, I also recognize that for some employers for maybe a C-suite position, you may give a employment contract that’s separate. We’re not talking about an employment contract and we’re not talking about positions that are not at will, but for the majority of our listeners, I’m pretty sure that they have at will employment, and you want to add that this does not constitute a contract of employment.
VANNOY:
I want to dwell, I’ll spend a bunch of time on both those topics separately because I think those are the biggies. Is there anything else that you want to checklist what not to include in there before we go deep on those two topics?
SIMMONS:
I sure we kind of got a long list because, and anybody could look this up, but I got the stories to go with it. So you don’t want to state compensation in annual terms. So let’s say I was hiring you for $40,000 a year. If I stated as such, you will earn $40,000 a year. We had another employer who was doing that and again, had that individual leave. Now this second individual left of their own accord and said, you said I’d get $40,000 a year even though I’m leaving. Where’s my 40,000?
VANNOY:
Now
SIMMONS:
They settled, but they didn’t get out of that situation free. So be very careful about how you state the compensation,
VANNOY:
And
SIMMONS:
I know that I get on my soapbox and talk about paying people properly, but please know how to pay that person before you create this offer letter because I have a lot of employers that’ll say to me, well, I just pay everybody’s salary. That’s what they want. Well, they don’t get to decide. The Fair Labor Standards Act gets to decide. I’ll get off that soapbox, but the main message here is if they’re getting paid salary, you could put something like stated, stated as such for a matter of convenience, or you could give that annual rate in a weekly salary and if they’re hourly, you would say this is your hourly pay. So make that clear how they’re getting paid and that they’re not getting $40,000 a year period.
VANNOY:
So you and I did a whole one hour show just on exempt non-exempt classification according to the Fair Labor Standards Act, go hop online, check out our website and watch that. If you don’t know it, it’s really important that you understand that. Mary, I really understand quite literally today, it was earlier today, I was talking to a small business owner and they were facing this exact same issue looking to hire someone and psychologically they were wanting to convey it was about that same dollar month. You’re talking about this is a $40,000 a year job, but by FLSA standards, it’s a non-exempt position, so it’s going to be paid hourly. And I was talking to ’em, I’m like, so you’re going to need to express this as hourly and I could just feel the consternation. It’s like they wanted to set the expectation that, hey, you’re going to earn about this much money. They understand legally why they need to pay hourly, but what guidance would you give people? I think I just heard you say you could say on an annualized basis that would equal, but I think the real guidance is to only express the hourly. Am I saying that right?
SIMMONS:
Yeah. I think I let them do their own math. So if they’re being paid hourly, you will be paid an hourly rate of X, right? If they’re being paid salary, you’ll be paid salary. Your weekly salary is X. That just makes it really, really simple and easy, and I get it. The employer maybe for their accounting reasons have to say to themselves, this position pays 40,000 in their head. But when we’re talking to our employees, first of all, they also need to understand that in some states, New York, Washington, Colorado, California, you have to tell them what their overtime rate is as well, which is time and a half by law. So that’s a differentiator as well here. So for that hourly person, how do you know they’re going to make $40,000 a year? You don’t know that because hourly people only get paid for the hours they work, and another way to state that is they get paid for every hour they work. So if they work 41 hours in a week, they get time and a half for that one hour that’s going to push them over 40,000.
VANNOY:
That’s a really good point. So I understand the desire for a business owner to want to, I like the way you phrased it. Do the math for them to make it simple. Oh, this is a $40,000 job. You’ll be paid hourly. But then if they do overtime, it could easily be more than 40, but maybe just as important if not more important, where they employers get themselves in trouble. What if you offer five days of paid time off, but this person takes 10 days off throughout the year and you don’t let them go? You keep them as an employee because a lot of good reasons to do that and life happens, but now they’re going to work less. You’re not paying them for the non-work time above and being on their PTO. They’re going to make less than 40, but your offer letter said they’re going to make 40.
SIMMONS:
Exactly. Just don’t do it.
VANNOY:
We
SIMMONS:
Can give lots of reasons why not just don’t do it
VANNOY:
And not to beat a dead horse here, but the purpose of the offer letter is to set clear expectations in good crystal clear communication. That doesn’t mean you have the sidebar conversation that’s like, okay, this is what the letter says, but between you and me, Mary, what this really means is you’re going to get 40 a year. I just had to pay it, break it out in an hourly because you could still stand in a deposition and say, remember on such and such date, Mr. When you told Mary she would make 40, right?
SIMMONS:
Yep. You’re losing,
VANNOY:
You’re losing, you’re losing,
SIMMONS:
And we’re here to help you win.
VANNOY:
Yeah. So the guidance here is clear. We understand we’re empathetic to the desire to do the math for folks and help them kind of understand they may be comparing themselves to other jobs that pay that much per year. They have to do the math on their own. You are really sticking your neck out by trying to annualize the number for them. You got to say the hourly rate.
SIMMONS:
Yeah, absolutely.
VANNOY:
Okay. Any other don’ts before we jump into? I really want to spend more time on at will and contract. This does not constitute a contract.
SIMMONS:
Agreed. I have two other things that I just want to point out to employers again. So normally you’re sending that offer letter ahead of your onboarding, so they get the offer letter and then they come into the office and you do the I nine and other onboarding paperwork. Some of that onboarding paperwork could be, so in a lot of states you cannot ask if they have a felony conviction until you make a conditional offer of employment. So nine out of 10 times, if not all the time, you’re going to give this offer letter before they have filled out their onboarding paperwork, which makes it a conditional offer of employment.
We have had employers in a couple of sticky situations. They make the offer of employment, the individual comes in and they cannot satisfy the I nine. Now, if you can’t satisfy the I nine, an employer is under no obligation to hire them. Again, it’s not. The conditional offer of employment is not a contract of employment. So you’re pretty safe in that instance, but now you’ve wasted a lot of your time, Mike, right? That person has filled out the I nine or tried to fill out the I nine. They knew they couldn’t fill it out, but they got that job offer, so they’re like, oh, I got a job. So this should always say, this is a conditional offer of employment. You need to complete all onboarding paperwork successfully. That felony conviction gets a little stickier. And the reason for this is that by law, we can deny employment if a felony conviction is directly related to the position.
For example, if I’m hiring somebody in a financial position, let’s say we’re hiring somebody as the CFO to an organization and they have a larceny charge, a felony larceny charge, we can say, gee, Mike, since you have that felony charge for larceny and you’ll be handling large amounts of money, this position isn’t right for you. Where it gets a little bit gray is let’s say you’re hiring a warehouse worker and they have a felony conviction for manslaughter because they got into a fight at their last warehouse job and beat the guy to death. True story. So don’t think I’m giving you outlandish examples. True stories. Well, you’re in a little bit of a gray area here, so make sure that that offer letter says conditional offer of employment and that they need to satisfy the onboarding paperwork successfully. So that’s a big one for me.
VANNOY:
How about, so I nine kind of a, you can’t work without it maybe, and it’ll go state by state when you talk about criminal backgrounds, things like that. What about contingent for drug testing? What about contingent upon certain skills? If the job that I have is maybe it requires me to use Excel in an advanced way and I show up on the job and I don’t have the skills, do I need to be putting those type of qualifications? Where does this continuum start and stop?
SIMMONS:
So now you’re talking about performance, right? I’m talking about satisfying onboarding paperwork. So it’s a little bit different, and drug testing would definitely fall into this realm. So when I worked for a major bank, you had to get drug tested because everybody had to pass the drug test. If you don’t pass the drug test, it’s pretty important to put that here because people know that they’re not going to pass it sometimes they may still try, but bank tellers, bank workers are bonded. So to pass that bonding, you have to do the drug testing. So that would be another conditional and onboarding requirement that they have to pass. Now when you’re talking about Excel, we’re splitting hairs here a little bit, right? That’s probably, we’re not going to find that out day one and we might not find it out day two, day three, day four, and now we’re into, you still need to put ’em on a warning notice and coach them out. So that’s different than your onboarding paperwork and requirements.
VANNOY:
So am I saying this right, Mary? The way people should be thinking about, it’s perfectly appropriate to put contingent upon in the offer letter, right? Correct. So we’re not listing annual salaries. We’re not annualizing doing the math, we’re listing just the hourly rates and it’s contingent upon and you list the things that it’s contingent upon, and it can’t be things that you would learn after they started the job. If their job requires a certain certification or a state license, certainly I nine, if you are on solid ground for drug testing, if you’re on solid ground for criminal background, then you list those things, right?
SIMMONS:
Correct, correct. Perfect.
VANNOY:
Okay.
SIMMONS:
Absolutely. And listen, I’ll just say one thing about the Excel. A lot of employers have certain tests that they have employees go through, and I just want you to be aware that there are some dangers, right? There may be disparate impact for certain groups of individuals and you kind of leave yourself liable for discrimination, but if they have to do Excel and you had an test that they took during the interview process or their very first day, then that could allow you to terminate the person also. But there’s all kinds, I just have to put air quotes around that. I would have to work with an employer on that to make sure that there wasn’t disparate impact, was the test regulated, et cetera. It’s not as simple as it may seem.
VANNOY:
I just did a show the other day with our friend Brian, and there was an employer, it was a staffing agency that they thought that they were just doing extra due diligence because as a staffing company, their reputation was on the line when placing people at their customers for work, and they had a very diligent I nine process, but they were asking for additional forms of identification and proof from people who are not US citizens, which was probably not okay anyway, but it would’ve been maybe possibly okay if they did it to everybody, but because they did it different for that group, kind of like a test, it’s like, oh, you have a different standard for these people. Instead of requiring the minimum requirement for nine nine, these guys got fined tens of thousands of dollars,
SIMMONS:
Right? Well, that’s straight up discrimination. So the last thing, sorry.
VANNOY:
I was just going to say, and the reason I even bring it up is because today’s topic, it’s offer letters. I think people generally give the benefit of the doubt to the employers. They’re just trying to do the right thing and they don’t realize these sometimes extremely expensive mistakes that they make in something as simple as an offer letter.
SIMMONS:
I agree. I agree. That’s why I hope a lot of people are listening. So the last thing that I’d really warn employers not to do is to state benefits as though without having a quantifier that says these benefits may change at any time with or without notice. I have had more employers get burned on that. Some employers give free health insurance
VANNOY:
And
SIMMONS:
Then decide I can’t afford that anymore, and they have to change it. You put it in an offer letter without a statement like these may change at any time with or without notice, and you’re probably paying for those benefits for a while before you can pull them. And benefits covers a lot of things. It’s not just your medical benefits. It could state there that have unlimited PTO, it could state there. You get a leave, you get whatever it is, make sure that you have a statement that includes when you’re talking about benefits, these benefits may change anytime with or without notice.
VANNOY:
Important. Yeah. Phrases like your health insurance will be free. Maybe it’s true today, but your premiums rise 75% next year for some your risk pool had some major health incidents and all of a sudden your premiums go up and you can’t afford it. You can be screwed if you making claims like we offer the top commission rates in the industry. Okay, maybe that’s true. Now all it takes is one competitor to have a better compensation plan, and now you might be raising commission rates for all your Salesforce for eternity, right? A
SIMMONS:
Hundred percent.
VANNOY:
Yeah. Cool. Time to jump into at will employment. I think a lot of people know the phrase, they don’t really know what it means.
SIMMONS:
Yes.
VANNOY:
So unpack it. Just give us a definition first.
SIMMONS:
So at will employment, and I’m stuttering because I’ve had so many employers misunderstand it, so I’m glad that you’re asking me for a definition
VANNOY:
At
SIMMONS:
Will. Employment basically means that I enter into the employment relationship at Will, and that means that I can leave at any time for any reason. Likewise, the employer enters into that employment relationship with the employee at will and can terminate that employee at any time. And by law it says for any reason with or without notice, this is where the employers get hung up. So what I need to put in red here and have everybody understand is that even though it’s an at-will relationship, you can’t break the law. So you can’t let go of somebody due to a discriminatory reason. So when I have this conversation with so many employers over time, Mike, they’ll say to me, but Mary, they’re at will. I can let ’em go anytime I want for any reason. And I’m like, you really misunderstanding the law. This is an individual in four protected categories. My advice is you don’t let them go on a moment’s notice unless it’s gross misconduct, which is the amount of the time. And even so I really want to guide employers on that instance,
VANNOY:
And there’s two sides to this coin, and you think it’s fair or unfair. All you want, it doesn’t really matter. If you’re in an at-will employment, that means the employer could let you go or the employee can leave on their own. The reality is the employee has no legal obligation to give you two weeks notice. They really can just leave whenever they want being in that will because they’re not under a contract. And so there’s no teeth to that, and even if it does mean so protected class or not, if you just choose to terminate employment for this person and maybe you have really good reasons for it and it has nothing to do with them as a human, may have just the business, the role change, whatever the reason, that does not mean you’re not going to get sued for wrongful termination. That doesn’t mean you’re not going to get audited by the Department of Labor because this person says, well, you owe them overtime. This does not mean that you’re going to not get sued by the EEOC because of the accusations of the reason why you chose this person. All those things happen all the time,
Which kind of comes back to what you do and don’t put in the offer letter, right?
SIMMONS:
Correct. A hundred percent. Very misunderstood.
VANNOY:
Yeah. What’s as specific as you reasonably can be? What words do we include then in the offer letter about at will employment? Do we have to define it what that even means to the employee? Because they probably don’t mean that means
SIMMONS:
No, no. It’s a regulation in most states. There’s a couple states that aren’t at will, and don’t forget, there are some positions which are not at will, such as your union or your civil servant. Employees are not in an at will employment relationship. So that wouldn’t go in an offer letter for those individuals, but I think you want to keep it short and sweet. This is an at will employment relationship, and this offer letter should not be misconstrued as a contract of employment short and sweet and simple. You don’t want it to come off too negative either. Right?
VANNOY:
Right, right.
SIMMONS:
Yeah. I don’t like when
VANNOY:
The civil servants, there are excluded categories.
SIMMONS:
Are there
VANNOY:
Excluded states? I’ve heard employers throw the turnaround, oh, this is an at-will employment state, are there non at-will employment states
SIMMONS:
There? I can’t come up with them off the top of my head. I think I know, but I don’t want to say it say here. We can always send it to everybody. But the other thing that I wanted to say is when you say define it, I have seen the description that I just gave in an offer letter and it really comes off negative. You can leave anytime. What will means is you can leave at any time and we can terminate you at any time. I’m not sure I want to read that in an offer letter, so I wouldn’t define it. It’s a regulation. If they want to look it up, they can look it up or they can ask the organization to explain it. But don’t forget, this is why you use a professional to help you with these offer letters so that somebody can explain it intelligently that understands I,
VANNOY:
Yes, I’ve had a hard time with this throughout my career. I mean earlier in my career especially, and I had a business partner that just wanted everything. So it felt so legalistic that I’m like, this is a new employee welcoming them into the family and the culture, and I wanted much more flowery language and welcoming language and inclusive and making them feel good. I think I’ve just kind of come to learn over the years. My partner, well, perhaps a bit too black and white was right. The purpose of this really is to set these kinds of legal expectations. It’s not the document where you’re setting cultural expectations. That’s a fair separation, right?
SIMMONS:
I mean, listen, I have a couple suggestions that I would add to an offer letter, and I think it’s nice to have a culture defining statement, maybe your mission statement, maybe your vision statement here at ashore. We say, welcome to one ashore and make sure that everybody knows that we work as a team. And I love that, but that’s short and sweet. We’re not going to put a novel here. We don’t want this to be a novel. We want it to be one to two pages tops. So I wouldn’t mind having your nice marketing statement on an offer letter to add a culture piece to it. I just wouldn’t make it too long or make it up on the fly kind of thing.
VANNOY:
And I think where I’ve landed, I’d be curious for your thoughts. I think we’re in alignment. Set expectations of culture through the interview process and through the selection process. Let them experience your culture through your interactions. Written face-to-face on the phone, you and others in the organization. And then on day one, when you do orientation, you should do orientation. That’s another one of the best practices that the benchmark survey reveals. That’s when you start talking about culture. Allow this thing to be really small, narrow scope that really is a bit more legalistic. It is crisp, clear expectation setting, but it is not an all-encompassing like an employee handbook might be to talk about our mission, vision, values, culture and welcome the family kind of stuff.
SIMMONS:
And you probably in most instances, have already sent them the employee handbook or you’re sending it with the offer letter or as soon as they sign it. So they’re going to get that handbook with more of that information. You’re absolutely right. I agree.
VANNOY:
Okay, so we talked about at Will. We talked about, spent a lot of time on annual pay versus hourly and how to handle that. We talked about at will employment, which then leads into this whole contract. What does it even mean to be a contract employee? You can still be AW two being a contract. I think sometimes people are confused, oh, contract that’s a 10 99 versus AW two. That means that will, can you paint a picture for what types of jobs? You may be a contract, have an employment contract and still be AW two employee.
SIMMONS:
Yeah, thank you for that differentiator. So you want to say why would they get an employment contract? As I said before, that’s normally for your c-suite individuals, you want to keep them and give them a reason to stay with you. So that employment contract is going to have more legalese. It is going to be a legal document. So I think in most cases it’s usually reserved for your C-F-O-C-E-O-C-M-O. So for your C-suite individuals, you don’t see it a lot in the US except for those positions where obviously abroad, not that we’re talking about abroad, but it’s very widely used in Europe, but it is pretty rarely used in the US and that should be a legal document, and my recommendation is to have an attorney draw it up.
VANNOY:
So let’s just parking lot that for if you’re an employer and you’re considering doing it, you should get an attorney in the person who you’re hiring. They should also get their own representation of that situation. And why might you do that? Well, let’s say your company’s in trouble and maybe you need a senior leader to come in to fix a serious problem’s going to take a while, and they’re going to have to fight through some fights and they’re going to have to have the endurance to stick around. And so maybe you have a carrot dangling out at the end to make sure that retain them through that period and that they’re rewarded for fixing the problems that you give them to fix. Those are the kinds of situations that employment contract might make sense. Probably never the case for the average employee, especially in small business. Right.
SIMMONS:
Yeah,
VANNOY:
Agreed.
SIMMONS:
Okay,
VANNOY:
So let’s put a nail on this in this thing then. So the goal of making it clear it’s at-will employment, this does not represent a contract in case it’s not self-evident. Why is that so important then?
SIMMONS:
Was that a question?
VANNOY:
Yeah, I like
SIMMONS:
The statement. It is important. I think we made that pretty clear that you just want to put that at will statement in there. It’s important. You don’t want to put term, you don’t want to say anything about how or when they’ll be terminated. I think that that’s super, super negative. And
VANNOY:
So I may be just being too obtuse here. I actually think it’s not super clear to everybody. You and I live this every day, so I think we just define what jobs actually get employment contracts and why an employer may offer someone an employment contract. And the guidance here is you stating that this is an at-will employment and does not imply a contract means that they should have no expectation. I think a lot of employees won’t have any idea what at-will means. They won’t have any idea what an employment contract means. So this is just, and forgive me again if I’m overstating the obvious. It is the employer’s way of making it crystal clear. I’m not giving you a contract here. There’s no expectation for ongoing employment in what that entails, right?
SIMMONS:
Correct. Agreed. Agreed.
VANNOY:
Okay. Let’s pivot to, you’ve got a pretty good list of things, essential information that we should include. So we talked about the don’ts. Let’s talk about the dues.
SIMMONS:
So you want to include their job title and you want to include their job duties. But look, you can attach their job description, which is I think a good idea, but don’t take up your offer letter to list all of their job duties. You might just want to say CMO overseeing all of the marketing within the organization, short and sweet. Again, this isn’t a novel. Very, very often I will attach a job description to an offer letter. So don’t get crazy with this. And also, if you’re listing the job duties and you choose not to attach that job description, make sure that you, if you’re listing job duties, which I’m not recommending, I’m recommending a short sentence, but if you said, Mary, I’m not going to listen to you and I’m going to list some job duties, make sure that you also say, and other duties as needed or as necessary or as assigned, right? You never want somebody to go, my offer letter says I’m only going to answer the phone and send out mail, right? A job description needs that on it. So does the offer letter. If you’re going to add job duties, we had already said that you should add that classification. So you should say whether they’re exempt, whether they’re non-exempt, and are they part-time, full-time, seasonal, et cetera.
VANNOY:
We have other one hour shows on those topics. Hop on our website to figure those out. But that’s FLSA Fair Labor Standards Act. Those are requirements that you must do. So no reason to not put them in your offer letter. Okay. What else?
SIMMONS:
I would put the work schedule just also understand, it’s funny sometimes someone I’m interviewing is asking me that, and I’m usually interviewing for exempt positions. So I’m not used to a work schedule because we’re remote. But it does help to say your work schedule is approximately now if they’re coming into the office, you probably have a work schedule. I think here also, depending on the position, if you think that schedule may change a little bit or it does change a lot and you know that please may vary from time to time, et cetera. Because if you tell somebody nine to five in this offer letter, it creates bad blood. They’re going to arrange their kids’ schedule or their workout schedule or whatever it is around these hours, let them know if it’s going to change or may change from my money. I would always put may vary from time to time so that people don’t say, well, you said it was nine to five, I can’t come in before nine project.
VANNOY:
Even if it’s never changed in your company’s history, you might have a business requirement that changes it tomorrow that you don’t know about, so,
SIMMONS:
Right. Right. Exactly. So I think that’s good. We talked about the compensation being included here. What we didn’t talk about more specifically is if they have a bonus. So let me separate bonus from commission. So if there’s a bonus included, I just want to really warn Employers in bonus in most cases wouldn’t be guaranteed. There’s usually KPIs, key performance indicators that that bonus is tied to. A lot of times that bonus can be tied to individual or department or organizational goals being met. And I would try to be as clear as possible. You could even say a bonus will be given based on KPIs to be discussed in a separate document, et cetera. But just be careful that you don’t say in a bonus of $10,000. Again, budgets change all the time that might be taken away. If that’s based on KPIs, you can’t really say it’s a $10,000 bonus because if they don’t meet their performance requirements, they’re not going to get that bonus. So that’s a bonus. I would be very careful about stating that. Personally, I would state it as there’s a bonus available based on achieving your KPIs.
VANNOY:
Mary, I’ve always taken the approach there. Same what you described earlier around job description. You acknowledge that there is a potential bonus commission variable compensation that you’re eligible to participate in the company’s plan and maybe you attach that, maybe you don’t. Maybe it changes every year, maybe it isn’t developed yet, but you acknowledge that they’re eligible for it in the offer letter. But you make the details of that be a completely separate document. Is that a good way of thinking
SIMMONS:
About it? Yeah, absolutely. But I’m going to separate commission because there’s a lot of laws and regulations about commission that is different than bonus.
VANNOY:
So when
SIMMONS:
We talk about commission, it is different. And we can have a whole seminar. We could do an hour on compensation, but in short, because we’re wrapping up here, if you have an individual on commission, I would have a legal document that is their commission agreement. First of all, it is a contract. So we just told you to state that this is not a contract to add all the information about their commission within this offer. Letter does not make any sense. And that commission agreement is a legal document. Many states regulate that you have to have a commission agreement by law. But even if they don’t, here’s what I’m going to tell you. Worked supporting a freight forwarder. They had a commission plan, never put it in writing. And when I joined, I said, we’re getting this in writing, but before I could get it in writing, an individual left went to an attorney and said, I brought in all these deals. I might not be there anymore, but they need to give me that. And they had to give those commissions even though this individual resigned, and that should be part of your commission agreement. What happens when you leave? What do you get, et cetera. And again, we’re not here to discuss that because we’re almost at time and we could do a whole hour on that. But very important, that bonus information, commission information is in a separate document, enumerated very specifically.
VANNOY:
Got it. What else, Mary? What else?
SIMMONS:
Yes, frequency of pay is important. So just remember employers, again, this is why you want to work with professionals is that your non-exempt people, even exempt people in certain states, and more importantly in certain industries, there will be a mandate of when they get paid. So for your manual laborers, most states or many, many states will mandate that those manual labor individuals, your construction workers, et cetera, manufacturing as well are paid weekly. So you should include the frequency of pay, but I want to tell you that you need to research that and make sure that you’re compliant. We already talked about benefits being in here and sort of some air quotes around that.
I would certainly put the expected start date. We talked about this is a conditional offer of employment. Here’s the things you have to pass. You’re going to go through a criminal background check. If there’s going to be drug testing, if there’s going to be references, proof of eligibility to work in the us like you said, a lot of organizations will mandate that you have a certification or some kind of degree, et cetera. So what I would include that in the offer letter as well. Again, we don’t want a novel, but these things are important to include.
VANNOY:
Mary, in our last few minutes maybe what kind of guidance would you give? So I think you did a good job covering what not to include, why we should have an offer letter, what not to include in a good laundry list of things to include. We’ll include this in the show notes for everybody afterwards as well, so you can hop on the internet and on our website and see it all. I have seen more candidates that have verbally accepted an offer and between the date that they accepted the offer and their start date, either no show or back out saying, oh, I’ve accepted something else. I’ve seen more of that in the last 12 months than I have the previous 12 years. So there’s a sea change happening here. What’s your guidance to folks after delivering offer letter and they haven’t started yet?
SIMMONS:
Well, you want to give them reasonable time to sign that offer letter. And by the way, just because they sign it doesn’t mean they have to start with you, but I would reach out. It’s not an employment contract. Yeah, listen, they don’t start for two weeks. I make it a point to tell employers when we’re working on their strategic onboarding process, which includes this offer letter, I make a point to tell them, Hey, you need to reach out to that candidate every couple of days. Once they sign that offer letter. That doesn’t mean stop reaching out to them for the next two or three weeks when they start with you. Hundred percent. You want to keep reaching out to them again, let them know that you want them to work for you and make yourself available for questions. Maybe that could make the difference between them just not showing up and taking that other position. If you go radio silent for two or three weeks before they start, they go on another interview and that person is more communicative to them. Maybe that’s what makes the difference and they take that position. But I just would make yourself available and communicate with them. Can’t wait for you to start.
VANNOY:
I couldn’t possibly agree more. If you think about it, if they’re a good candidate, they have options and you’re not the only game in town that they’ve been interviewing with and you get the offer, they accept it, maybe they sign it, maybe it’s verbal, whatever. Do you really think that if you thought they were awesome, do you really think the other places also didn’t think they were awesome? They’re continuing to call on them. So you get that. I mean, find an excuse a day. It’s like, Hey, saw this article and thought of you can’t wait for you to make an impact here. Hey, just wanted to see. Why don’t you just send me a picture of your new desk? What color? What color mug do you want? I mean, find anything and excuse a reason to keep contact. Make yourself hard to say no to if a better offer does come in between your offer and their start date.
SIMMONS:
I love that. I love that.
VANNOY:
Yeah. All right, Mary, I think we’re at time. Any closing arguments that you want to make advocating for why people should be doing it? What to include, not include?
SIMMONS:
Listen, I think it is the professional thing to do and it sets expectations, but please get some guidance on that offer letter because I think our list of don’ts was longer than our list of what you should include. So
VANNOY:
I don’t
SIMMONS:
Want you to get in trouble.
VANNOY:
And obviously the purpose of this show is always to add value, whether somebody does or does not choose to do business with us. This is obviously what you and your team does. I will say this is one of those areas that I think people can overly rely on Google and chat GPT, because it can crank out an offer letter, but it doesn’t mean it’s going to be right or even, and I hate to use the word legal because there’s not such thing as an illegal, but there are best practices to include and not include, which we just reviewed. And unless you’re an employment attorney or a SHRM certified HR professional, how would you know this offer letter that you pulled off the internet is actually sets you up to succeed or could in fact set you up to fail because you’re not qualified to audit it. Right? Exactly. Yeah. So whether it’s us or somebody else, do get help and get a professional’s opinion, but be sending offer letters and follow the best practices.
VANNOY:
Thanks for your time and thanks for everybody else for joining us today. Until next week,