New Accountant Threatens to Quit Without Offer Letter: How Should HR Respond?

Dear Sir,

We appointed an Accountant in our organization last week. In our concern, there are no formal procedures. After joining, the candidate asked for an offer letter, otherwise, he would quit the job. However, the management informed him that the offer letter would only be provided after three months.

We seem to be encountering problems each and every time. As HR professionals, what can we do?

Thank you.

What is the harm in giving the offer letter to the candidates who have already joined your company? He/she has the right to demand the appointment letter on the joining date.

Hi Gopinath,

What is the agenda behind not issuing the employment documents to the employees in your organization? What is the nature of your organization's business? Also, being an HR professional, what steps have you taken to rectify these issues? If basic procedures are not formalized, then there is no need for an HR role in your company. Anyone would be able to run the show.

Your organization needs to follow the correct procedure once the employee joins your company. The issue of issuing the Appointment Letter after three months is a gross neglect of either the Shops & Establishment Act or the Factory Act. Anyway, the other two members have given their opinions on it, and there is nothing further to add.

Clarification on Terminology

I would like to express my concern about the choice of your terminology. How come you have jumbled between the terms "Offer Letter" and "Appointment Letter"? The former is issued to the job candidate to express the organization's willingness to onboard them, whereas the latter is issued once the job candidate actually joins the organization. You should have used the term "Appointment Letter" and not "Offer Letter."

A noteworthy fact about your post is that it has come from a well-qualified person. The query hardly behooves your qualification well. Furthermore, there is a serious error in the post as well. Adhering to legal phrases or official terms in our communication is an important rule. No professional, HR, or otherwise, can bypass this rule.

For Saji and Mahesh: It is unfortunate to note that both seniors like you have overlooked the major flaw in the post!

Thanks,

Dinesh Divekar

Dear Dinesh,

If you have gone through the reply, you would have noticed that I have pointed out: what is the harm in giving the Offer Letter "as per the query of the poster" wherein the employee has the right to demand the Appointment Letter on joining.

Job candidates resign based on the strength of the Offer Letter they receive from their future employer. However, if the offer letter is not issued and the employee joins, then the issue of the offer letter has no meaning. To establish a legitimate employer-employee relationship, what is needed is the issuance of the Appointment Letter.

Those who are not from HR may confuse the offer letter with the appointment letter, but this confusion should not be expected from HR professionals. Instead of correcting the newly joined employee, HR has also become a party to this confusion, as mentioned in my previous post.

Thanks,
Dinesh Divekar

If you have gone through the reply, you would have noticed that I pointed out, "What harm is there in giving the Offer Letter 'as per the query of the poster'?" where the employee has the right to demand the Appointment Letter on joining.

Best Regards,
Saji

I agree with your statement; I share the same opinion. It seems there might be a misunderstanding of my viewpoint. The poster mentioned facing the same problem repeatedly, and as HR professionals, we need to consider what actions to take.

Issuing Offer Letters Before Joining

In light of this, I asked: What is the harm in issuing the offer letter to the candidate "before their joining"? On the contrary, the employee has the right to demand the Appointment Letter upon joining. However, the poster/employer is hesitant to provide it at that time and prefers to give it three months after joining.

I am aware that the offer letter does not hold any value after joining, but the Appointment Letter does. My suggestion to the poster is that an Offer Letter should be sent to the candidate upon their selection to confirm their acceptance. Upon joining, an Appointment Letter should be issued with all terms and conditions and the salary breakdown. I hope this clears up any confusion for the poster.

Understanding the Importance of Offer and Appointment Letters

Please allow me to add value to the above wonderful conversations. First of all, the implied act of the employer, as well as the employee itself, indicates the joining of the accountant. Therefore, there is nothing harmful in issuing an offer letter when requested.

However, it is the natural right of an individual to ask for an appointment letter. Generally, many firms deny issuing offer letters as well as appointment letters. My suggestion to the employee is to keep the payslip or the account credit statement for any future reference.

Legal Framework Governing Appointment Letters

Next, speaking about the law of the land, I would like to highlight with my limited knowledge that the 'Appointment letter' is governed by the following Acts:

1. Sales Promotion Employees Act 1976: It makes it mandatory to issue an appointment letter within 3 months. Presently, the Act is applied only in the Pharmaceutical sector.

2. Shops and Establishments (S&E) Act: This Act is state-specific, so rules vary from state to state. For instance, the employer is mandated to furnish Form-X (Appointment letter) at the time of obtaining registration or whenever asked for in any inspection. In Section 33 of the Delhi-Shops and Establishments Act, 1954, the appointment letter has to be exhibited conspicuously at the premises of the establishment.

3. Contract Labour (Regulation and Abolition) Act (CLRA Act): Service certificate Form XV, though in a strict sense, cannot be called an offer or an appointment letter. However, it may suffice as an experience letter or employment proof where the employer denies issuing any letter to the employee.

Generally, company policy also guides the administration or operational issues, and where the policy remains silent, the matter needs to be accommodated suitably.

On the contrary, where the employer denies issuing any offer letter, appointment letter, or any letter, the matter can be settled after submitting a resignation, and that too formally after serving the notice period (stated in the resignation letter). Nowhere can the company escape its moral obligation.

Regards,
[Username]

The Importance of Issuing Appointment Letters

No individual will join any organization unless they receive an invitation in some form (except oral), get an ID card, employment card, or muster daily attendance, etc. As per the CLRA (Labour Act), the issuance of a formal appointment letter is mandatory, especially when it comes to litigation.

The Role of HR in Appointment Letters

Dear G. Sangeetha, being an HR professional, you must seize the opportunity to assert your power, formulate the system, and inform top management that issuing an appointment letter instills confidence among employees about the company. This leads to better output and a more effective HR system. The appointment letter also defines the employee's responsibilities and should outline service conditions such as leaves, salary/perks, etc.

This requirement applies to every employee/executive except the owner/proprietor. In the case of a partnership firm or a group of companies, the CMD/Director/Partner must be authorized by other Directors/Partners through a resolution to operate and manage the company, which essentially serves as an appointment letter.

Accountability and Appointment Letters

An appointment letter is an authorization for an employee to undertake specific functions with responsibility in the factory/office. Without it, no one can be held accountable for any lapses, making it easy for them to evade responsibility. For instance, an accountant without a specific appointment letter cannot be held responsible for any errors.

I slightly disagree with Mr. Pradipnath's concluding statement. When there is no appointment letter, the question of resigning with a notice period does not arise.

Thanks to all,

Regards

Understanding the Role of Offer Letters in Employment

Just wondering, how did the accountant join the company without being "offered" a job? If he/she is ready to accept an oral offer, then why ask for an "offer letter" now—after having already joined work? He/she should rather wait for the month's salary, which is the real purpose of employment.

The Dual Nature of Appointment Letters

Actually, an "appointment letter" is a double-edged sword. On one hand, it assures the employee that he/she is a bona fide employee of the company with specified pay and privileges. On the other hand, it binds the employee to the terms and conditions of the service and the rules and regulations of the organization. The issuance of an appointment letter is generally delayed until joining formalities are over, background checks are done, and sometimes until the probation period is completed.

Challenges Faced by Employers

There are many defaulters who join work and leave within a few days. They use the offer letter to bargain for a better offer from another company. Sometimes, female employees go on pregnancy leave 8 days after joining. SMEs cannot afford such wastages. HR should protect the company's interests as well as the employees. The employee could have been hired as a temporary hand or consultant and, if found suitable, then be offered employment.

Legal vs. Best Practices in HR

Finally, HR professionals should distinguish between what is legally binding and what are generally accepted HR best practices. This confusion is typical of HRs who join after an MBA/PGDip, where they study more about HR practices borrowed from the corporate world. Small companies would rather be worried about legal/statutory requirements.

For instance, the so-called offer letter is typical of offshore placements in MNCs, to enable the candidate to get a visa/work permit. It makes no sense in domestic employment, and it does not have any legal sanctity.

Regards

You have written that the issue of the appointment letter is generally delayed until joining formalities are over, background checks are done, and sometimes until the probation period is completed.

Comments on Appointment Letter Delay

The above statement does not have any legal sanction. Delaying the issuance of the appointment letter beyond 15 days is acceptable, but waiting until the completion of the probation period is outrageous. Suppose the Labour Officer visits the premises and observes that the appointment letter has not been issued even after two months of employment. Suppose he issues a notice on this point. Please confirm what a valid reply we can give under such circumstances.

Offer Letter for Offshore Placements

You have written that, for instance, the so-called offer letter is typical of offshore placements in MNCs, to enable the candidate to get a Visa/work permit. It makes no sense in domestic employments, and it does not have any legal sanctity.

Comments on Offer Letter as a Contract

We do not know whether under the provisions of the Indian Contract Act, 1872, the court will consider the Offer Letter as a contract between the job seeker and the job provider. Based on the offer letter, an applicant for the job may resign from his/her existing job. Revoking the offer could incur huge losses for the job applicant. Therefore, it could be considered a contract. However, this is my interpretation, and I do not have any case law to quote under the contract act.

Final Comments on Professional Management Practices

More than the legal side, the case needs to be looked at from professional management practices. Not issuing the offer letter and telling the newly joined employee to wait for three months are all unprofessional practices. This shows a lack of self-belief on the company's part. If the right job candidate is selected and if the company has the right working practices, then the company earns the trust of the employee to continue. Instead of earning trust, when the company resorts to malpractices, they are likely to face the problems mentioned by the originator of the post, and they will continue to waste time on these sundry activities. This type of company will never be able to build a brand, which is supposed to be the ultimate goal of any business owner.

Regards,

Dinesh Divekar

Gopinath,

An offer letter is issued when an employer shows interest in hiring a candidate found suitable. This can be issued in a letter or email. Based on the above document, the candidate joins. After completing the joining formalities, he/she becomes an employee and would receive an appointment letter.

If any employee doesn't receive an appointment letter, he/she would leave without a notice period once they find a better opportunity. They can demand it from the employer, or otherwise, it can be settled in labor.

Venkateesh

Thank you for reviewing my post. I agree with your comments. Just want to add that, in many SMEs, there is more personnel administration than HR management. These companies are traditionally scared of labor issues, and the phobia extends towards employees of all cadres. First and foremost, they expect the HR manager to steer them clear of any legal problems. Some of the HR practices and issues that we discuss here have no legal sanction, like the 'offer letter.' So the first question the management would ask an HR is, "Why are you introducing new rules that are not required by statutory/regulatory bodies?"

Indeed, HR best practices are what attract a talented workforce to a company, at least in the case of major corporates. But then, these are targeting to hire well-qualified and highly skilled professionals. In the case of SMEs, such talent hunting and talent management are not really the focus of HR. These companies fit into level 1 or 2 of the CMMI model, by analogy. HR would be grappling either with nagging defaulters or with over-enthusiastic performers. First, the house has to be set right and kept secure from troublemakers.

The human resources in small companies are not generally used to much professional ethics or norms. You would see employees jumping from one small company to another, whereas among major corporates, there is an understood norm that they don't hire employees who come from a rival organization. For instance, Infosys may not like to hire someone who is leaving Wipro because that may be seen as fishing or stealing the workforce and is considered an unethical practice. Such self-regulatory practices do not exist in small companies, and employees take advantage of it.

All I want to say is that HRs must win the confidence of the management first by putting the organization on a strong legal footing and then branch out into the sophisticated HR practices that they learned in their MBA classes, which make the companies employee-friendly and attractive.

Regards