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Offer Letter vs. Employment Contract

Employment Law | September 13, 2022 | Written by Rajvir Nagra

If you are an individual looking for a new job or an employer looking to hire for a new role, it is crucial to understand the intricacies of job offers. As a team of experienced employment lawyers, Linley Welwood knows how important contracts are for employers and employees alike. That is why we have outlined some information to compare offer letters vs. employment contracts to help you understand how they differ and why they are important.

Learn about some common mistakes that employers make with employment contracts.

What is an Offer Letter?

Also known as a job offer, an offer letter is a document, email, or verbal offer of employment from an employer to an employee. Offer letters typically include a few details about the position including the salary, start date, and working hours, though these details can vary based on the discretion of the employer and may be included in the employment contract instead.

Most offer letters include a section that asks the employee to review an accompanying larger document, which is typically the employment contract. This means that an offer letter typically serves as an introductory document for the employment contract. It is crucial to note that an offer letter is not a binding document, and either party can back out of the agreement before signing the employment contract.

What is an Employment Contract?

Also known as an employment agreement, employment contracts are legally binding agreements comprised of an offer from the employer, acceptance from the employee, and “consideration” in the form of wages paid for the work performed. Employment contracts are formed when an employer makes a job offer and the employee accepts, even if there is no physical contract.

It is best to create a written employment contract that can be reviewed and signed by both the employer and the employee. Employment contracts include information that outlines the employee’s salary, working hours, responsibilities, location of work, company policies, restrictive covenants, and conditions for termination. By signing an employment contract, the employer indicates their acceptance of the terms and conditions presented by the employer and enters a binding agreement.

How do They Differ?

Offer letters are short documents that extend an offer of employment to an individual while employment contracts are larger documents that outline the terms and conditions of employment. While offer letters are not legally binding and can be rescinded by the employer or rejected by the employee, employment contracts are legally binding once both parties have signed them.

To learn more about our employment law solutions or to discuss the details of your situation, get in touch with the experts at Linley Welwood. We can be reached through our online contact form and will be happy to answer any questions you may have.


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