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Offer Letters vs. Employment Contracts

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When you're offered a job, you may be asked to sign an offer letter. This letter includes specifics about the position, such as the job title, salary, benefits and the starting date. While an offer letter constitutes an agreement between the employee and the employer, it’s not the same as an employment contract. Learn the difference between the two documents so you know what you're actually signing.

Offer Letters

An offer letter, most commonly used for professional or high-paying positions, is primarily a summary of the position being offered. Even though you and the employer both sign it, you’re not protected from termination if you accept it. An employer can rescind the offer or fire you any time. In addition, offer letters aren’t always ironclad. The letter might include a sentence such as “the terms of this offer are subject to change.” For example, if he promised you a full-time position, he could later cut your hours to part-time.

Employment Contracts

An employment contract requires both parties to adhere to the agreement and all conditions listed in it. It’s most commonly used for high-level executives, sales representatives and independent contractors. Contracts frequently establish detailed conditions for both the employee and employer. This might include clauses stating that the employee is prohibited from revealing company secrets or working for a competitor after leaving the organization. It might also include a clause stipulating how and when the employee can be terminated.

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