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The job offer is one of HR’s most critical operational duties, as the offer initiates the employee’s legal employment relationship with the organization. The job offer is also the last time candidates can negotiate terms and conditions and learn about the job before joining the team. The offer letter itself protects the employee and employer by making expectations clear. When the job offer process is handled well, new hires join the company on a positive note, excited to get started on Day 1.
Susan Heathfield, an HR and management consultant based in Lansing, Mich., discussed with SHRM Online the key components of job offers, potential traps in the process, and what HR can learn about a candidate at this final stage of the recruitment cycle.
SHRM Online: What goes into making a job offer?
Heathfield: The job offer essentially tells the candidate what is being proposed in compensation, benefits, job title, and other terms and conditions of employment. It is the employer’s opportunity to negate future misunderstandings with employees. The offer should spell out vacation time, personal time, paid time off, any expenses the company will pay, and if the positon includes the use of a company vehicle, phone or computer equipment. I will usually refer candidates to existing documentation in the employee handbook on conditions such as whether or not bonuses are given or how they are determined. This is also when you want to talk about things like noncompete agreements. It should be very clearly stated what you expect the candidate to sign prior to starting. The job offer may be negotiable, depending on the position. Or the employer and the prospect may have negotiated the details prior to the formal, written offer.
SHRM Online: What should HR be prepared with when making an offer?
Heathfield: HR needs to know what the company’s parameters are for salary negotiations. The salary and benefits package should be decided upon earlier in the recruitment process, often as early as the determination of the need for a position. When salary range and benefits have been discussed and understood before the written job offer stage, this step can progress smoothly.
More and more people are coming back and asking for more pay these days. If it’s within your ability to pay, and it keeps the person consistent with market rates, skills and experience, that’s OK. But if candidates are asking for more than $5,000 over the offer, it’s got to be within the limits and within the fair practices of the company. Employees talk about salary. You’ll be faced with Susie telling John that she makes X and he settled for less. He’s immediately disenfranchised. He’s then parked on HR’s doorstep saying he got low-balled.
SHRM Online: Is the job offer an employment contract?
Heathfield: Yes. That’s why the timing is so important. Before anything is put in writing, I want to discuss all of it with the candidate. We may have already negotiated an offer and counteroffer. Candidates may have already tried to negotiate for more pay or more vacation time, but I try to have all of that done verbally before I put my energy into producing a final, written, contractually binding job offer. One thing an attorney told me: If I verbally agree to what we discussed and then I duplicate that in the written job offer, and then the candidate attempts to negotiate again on some item, it reneges the entire offer and I don’t have to make another offer. In fact, if someone does try to negotiate once a verbal agreement has been made, I’m not sure I want to employ that person. Senior candidates are also likely to ask for severance to be included in the offer. The more senior the position, the more likely the candidate is to negotiate. The negotiation can last several weeks as a senior candidate will generally ask an attorney to review the employment contract.
SHRM Online: At what job level do you bring in legal counsel to review the job offer?
Heathfield: Senior manager and above. Moving beyond front-line managers, you have to be open to more possibilities. I’m most careful with the severance package. For small and midsize companies, severance for executive positions can be a lot of money. You want to be careful about what you can afford. There’s no guarantee that this person is going to work out.
SHRM Online: Where are the potential pitfalls in the job offer process?
Heathfield: Overpaying for what you can afford or what the market provides. Overpaying will affect later decisions about salary increases if the person came in at the top of the scale. I lay out what the new hire’s biweekly compensation will be, and state that the compensation equates to X on an annual basis, assuming they are still employed. If the company has a probation period, I make it clear that this presumes that the employee is successful and at any point during the probation he or she can be terminated. Making oral promises outside of the written job offer is another trap. In some cases, candidates are interviewed several times by different managers and so you have to caution everyone that will be interacting with the candidate that they are to make no casual offers. All salary questions should be referred to HR. Interviewers must be trained on how to talk about salary and benefits. Set up one point of contact, so you don’t risk muddying the waters and alienating good candidates. If several people are involved, the possibility of misinformation, a misunderstanding and, potentially, a lost candidate increases.
SHRM Online: What can you learn about candidates during the job offer process?
Heathfield: You can certainly learn about their tenacity. One candidate made six counteroffers and was driving me crazy. But I was bringing him in for VP of sales so it was a good sign.
I would look negatively at people who overstep the line of fairness. If someone tries to reopen negotiations after an accord is reached, it’s a step in the wrong direction.
Roy Maurer is an online editor/manager for SHRM.
Follow him @SHRMRoy
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