MaRS Library Offer of employment and employment contracts: What startups need to know
An offer of employment is a legal contract between an employee and your organization. This document should clearly state the terms and conditions for both parties. Before entering into such a contract, review the Ontario Employment Standards Act and seek legal advice as necessary.
There are two types of employment contracts that should be considered:
- A fixed-term contract that has an expiry date
- An indeterminate contract that has no expiry date
Preparing the offer of employment
When preparing an offer of employment, certain information must be included to ensure a comprehensive employment contract. Make sure you:
- Make clear whether this is a fixed-term or indeterminate contract
- State the date the employment contract will begin and with whom the contract is made
- Set the expiry date (if this is a fixed-term contract)
- State the employment status (for example, permanent full-time)
- Cite any probationary period
- Describe the name, nature and expectations of the position (this may be provided as an addendum to the contract)
- Make clear the reporting relationship
- State the base salary and the frequency of each payment
- State the bonus or commission payments if applicable (this may be provided in a separate contract)
- List the benefits that the employee will have access to (this may be provided as an addendum to the contract)
- List any vacation entitlement
- Specify how and when the employment relationship can be terminated
- Stipulate any requirement to sign a non-disclosure agreement (NDA) as part of the condition of employment
- Secure the signatures of the employee and the organization’s representative(s)
Other important inclusions to cover in the offer of employment are:
- Salary increases
- Policies that affect this employee (for example, reimbursement of expenses)
- Hours of work
- Other legal restrictions or requirements (for example, non-solicitation agreements or intellectual property rights)
Making the offer
In most circumstances, the initial offer of employment will be made verbally over the phone. This should be done as soon as possible in case the candidate has been looking for opportunities elsewhere.
The offer should be explained in accordance with the employment contract specifications above. There may be negotiations over certain aspects, including compensation, timing or legal restrictions. The candidate should be given a short period of time to consider the offer, which can be negotiated. Typically, other candidates are not contacted until this offer is accepted (or declined).
The verbal offer should be followed by a written employment offer that clearly states the expiry date of the offer.
Stipulate that any verbal offer is conditional upon signing a written agreement and that the candidate must sign a copy of all required documentation prior to their start date.
Offers of employment: Tips
- Bear in mind that while it is not legally required to have a written employment contract in Ontario, it is highly recommended to have one to ensure both parties understand the employment relationship
- Hire a lawyer to review and/or create your standard employment contract to ensure that legal clauses and all important elements have been included
- Always have at least two people review each offer to avoid errors and omissions in the contract
- Include a clause stating that the organization retains the right to amend the contract with proper notice and cause (for example, for aspects such as job responsibilities, reporting relationships or group benefits)
- If any reference checks are still outstanding when making the offer, make sure that the written employment agreement states that the verbal offer is conditional upon satisfactory references