Clarification Needed: Is an Offer Letter Mandatory Before an Appointment Letter in HR?

Dear all,

We have started formulating HR policies and procedures for our newly established software company. Our plan is to inform the interviewed candidates of the results and the date of joining through a phone call, and provide them with an appointment letter at the time of joining. This appointment letter will include the joining date, salary details, and rules.

Clarification on Offer Letter Requirement

I would like clarification on whether it is mandatory to provide an offer letter before the appointment letter, or if it depends on the company's interest. Your suggestions on this matter would be greatly appreciated.

Thank you.

Providing Offer Letters in Advance

It is advisable to give the offer letter well in advance to the shortlisted candidates to ensure they can join on a specific date. The offer must be accepted by the candidate in return.

Establishing an Employer-Employee Relationship

To establish an employer-employee relationship, an offer letter must be issued to the prospective employee, and acknowledgment from the employee should be obtained and filed in their personnel file. The contract of employment can be issued later, once the employee joins the company.

With regards,
Madhusudan

Let's forget your company and whatever HR policies you are now formulating for a moment. Would you accept such a scenario for yourself—without any document from any company that you have been selected and should join by a certain date [everything verbally]? Would you have the confidence to resign, go through the notice period, and then join—in the quality of the world we are in now?

At least, I wouldn't—what if the company says later that I wasn't even selected or asked to join [for whatever reasons]? However, it would have been more appropriate if you had mentioned the reason(s) for this decision/query from you.

Why the hesitation to put things in writing?

Regards,
TS

I fully agree with Tajsateesh. Nobody would like to serve on telecalls only. Sometimes the call can be a hoax, and you will not know what to do if you get cheated. It is a must to issue proper interview letters, call letters, joining letters, etc., particularly in private industry. It is compulsory in government and public services.

Think it over yourself in the same position and then realize the implications.

Regards

Such policies will never prepare any candidate to trust you. Candidates who are already employed will not be ready to submit their resignation to their current company until they have a confirmed job offer in hand.

Alternative Approach to Offer Letters

Instead of withholding the offer letter, I suggest providing them with an offer letter that does not include salary information. This way, the candidate will have job confirmation, and you will prevent them from negotiating with other companies based on your offer letter.

Importance of Including Salary Details in Offer Letters

Giving an offer letter without mentioning salary particulars would be misleading and incorrect. Unless the prospective employee knows what salary they will receive from their new employer, why would they resign from their existing job? Additionally, the employer may contact the other employer and ask them to withdraw their offer of employment, resulting in the employee losing an opportunity.

Regards,
Madhusudan

Madhusudan,

For the misleading part, we can clarify to the candidate that we have not mentioned the offered salary in the offer letter. It is just a confirmation of their job. At least they will consider joining the company. Giving nothing will create a possibility of leading them to deny our job. It's better to give them an offer letter without salary information.

Employers will only contact other employers not to offer the job if they know which employer is offering the candidate. Otherwise, they will not be able to do so, and that is a very rare case. We can never overcome such conditions.

For the benefit of all.

As mentioned by Saji, the offer letter should have details regarding the expected joining date, the position for which the person is hired, and these days they add a line - Offer valid if joined on or before the Expiry Date... so that candidates don't misuse the offer letter...

However, I believe that the offer can be extended over email as well. As Madhusudan mentioned ahead -

Please note that an offer letter does not initiate the employee-employer relationship; it is the appointment letter that does so...

An offer letter is just a letter of intent from the company which the company gives to the person. The person has full rights to accept or reject the offer...

Kindly note that we are not usually required to sign the offer letter, and it has no legal implications...

The appointment letter is the right letter to build the employee-employer relation.

With TS raising the right concern,

A verbal confirmation cannot be contested... If, say, you confirmed me over the phone, I resign, and when I come to your office and you say I never confirmed you, and do I have any proofs for it... where should I go?

Since emails are increasingly accepted as formal conversations and are legally accepted as proofs, at least a written email to the concerned person should be more assuring than merely a phone call.

Secondly, I would like to know what made you think not to extend an offer letter and directly issue an appointment letter...

Are you facing any problems after the issuance of the offer letter? If so, kindly discuss the matter so that we can collectively think in the right direction and search for a solution...

Regards

[QUOTE=dharshinihra;2070384]

Clarification on Offer and Appointment Letters

We started formulating HR policies and procedures for our newly started software company. We have planned to inform the interviewed candidates of their results and date of joining through a phone call and give an appointment letter (with joining date, salary details, and rules) at the time of joining. Kindly clarify for me, is it compulsory to give an offer letter before the appointment letter, or does it depend on the company's interest?

Need suggestions...

Thank you.

Industry Practices and Ethical Considerations

Most companies in manufacturing issue an appointment letter. When the IT sector started issuing offer letters and then issuing the appointment letters after joining, some manufacturing sector companies, including us, started following this. An issue of ethics came up in some MNC companies. The reason being the offer letter did not have terms of appointment, and the terms given in the appointment letter were not revealed in advance. Now, at least in my company, we are very particular about ethics. We sent it to the legal department. The legal opinion was that when the terms of the appointment are not fully revealed before the employee joins the company, then none of the terms are valid, except the terms communicated in the offer letter. And the offer letter only contained salary details, designation, and grade, apart from the validity period of the offer.

We realized that apart from the legal issues, it also violated our ethics policy since transparency is our core value. The ethics committee felt that we need to be transparent about our terms of appointment before the employee joins. If he is uncomfortable with our terms, we do not mind looking for someone else.

Hence, we reverted back to issuing appointment letters and no offer letters. All our terms are transparent, and we even send them the forms for insurance, so that they can fill it up and send it across to us before they join. We register them in insurance one month before they join so that they can avail of the benefit from the date of joining itself. We sustain this engagement with the prospective candidate, and it becomes difficult for him to withdraw.

We are a petrochemical multinational based on Oil and Gas. Our competitors are Reliance, Shell, Chevron, AGIP, Total, etc. We are listed on the NYSE. Hence, the application of ethics policy is mandatory and essential for us, since corporate governance standards are monitored by SEC.

Differences in IT Sector Practices

The thought in IT companies is a bit different. They have an issue with the employee taking the appointment letter and negotiating salaries and not joining. But, that could even happen with an offer letter.

Aligning Policies with Organizational Values

In terms of policies, you need to align them with the values of the organization. Only then will the HR policy and the values become interlinked, and the HR "feel" will be vibrant. My advice would be to check whether any system that you are creating is in line with your organizational values. And then evolve the system. If it does not, then do not incorporate such a system. The values then just become jargon. And values are essential for an organization to reach its mission.

All the best.

Thank you, everyone, for your valuable suggestions and for providing detailed explanations. The candidate may negotiate with any other company based on the offer letter issued by us. A few companies I know are not issuing offer letters. This is the reason why I had this doubt and wanted to know if it is legally compulsory to issue an offer letter.

I accept the fact that giving a written offer letter will create confidence towards the job confirmation. As mentioned, using emails for the offer letter is also good.

Further Clarifications Needed

From your suggestions, I have some more doubts:

1. Discussions about pros and cons are ongoing in this thread regarding including salary details. Kindly confirm whether to include them or not.

2. Though we mention terms and conditions in the appointment letter, I thought of including the statement:

"I understand that this offer is based on the information provided by me in the resume and at the time of the interview. In case of any discrepancy or information found to be wrong, the organization has the right to withdraw the offer or terminate services during my employment without prior notice. I accept the terms of this offer."

in the offer letter and getting it signed by the candidate if he accepts the offer. Is it not necessary?

Awaiting your responses.

Please consider including salary details, which are important to build a trustworthy relationship between your organization and your prospective employee. The clause you have mentioned in point no. 2 is also good; you may include that in the offer letter.

With regards,
Madhusudan

I agree with the anonymous recommendation. I have a small IT company dealing with US clients, and we have also been following the same principles. Many times, the candidates who were selected and offered the appointment letters with full terms and conditions by us and had confirmed the appointment acceptance also did not get their salary increase from the old company and did not join us. However, that is their personal decision, and we do not want such individuals in our organization who cannot be trusted with minor financial benefits. Trust between employees and the employer is essential for the reputation and growth of the organization. Therefore, there should be transparency in the dealings right from the start.

Regards,
Mahavir Mittal

The Importance of Offer Letters

Giving an offer letter is a good practice. An offer letter carries information about the post, salary, terms and conditions, and date of joining. It is an assurance from the company right from the start. Therefore, the employee also gains confidence about the job offered. An offer letter should be prepared with utmost care as it reflects in the employment contract too.

Well, even if you have informed the employee regarding the interview results, you need to also inform them about the company's terms and conditions, the CTC offered, and any deductions in writing rather than communicating verbally. If you choose not to provide an offer letter, that is your decision, but I believe there is no harm in issuing one.