Reading time: 4 minutes

There are many different factors that influence whether an offer letter or an employment agreement would constitute a binding contract. The offer letter or employment agreement can amount to a contract depending on whether it meets the requirements for a binding contract. The name of the document is irrelevant when determining whether it is a contract or not. Ideally, when engaging an employee there should be two separate documents provided to an employee: an offer letter and an employment contract. 

This article will look at what:

  • is contained in a letter of offer;
  • makes up an employment contract; and 
  • makes a contract.

Employment Letter of Offer

A letter of offer is typically a short document with very basic details outlining an intended employment engagement, including the:

  • position;
  • type of employment; 
  • company name; and
  • terms and conditions set out in the employment contract (which is often attached).

In the offer letter, the employer may request information such as: 

  • a TFN declaration form; 
  • a Superannuation Standard Choice form; or 
  • any documents that are necessary for the role.

The employer may also request that the employee signs and dates the attached employment contract and returns a copy to the employer. The offer letter itself does not usually contain the comprehensive terms and conditions that an employment contract would. 

An employment contract is preferable because it:

  • includes all the details of the terms of engagement with the employee;
  • allows either side to point to the relevant clause in the contract if any disputes arise; and
  • avoids disputes arising in the first place, as both parties are fully aware of their rights and obligations.

Employment Contract

An employment contract is generally a much lengthier document. It contains detailed terms and conditions of employment. For example, it will typically set out:

  • employee’s duties;
  • any probation period;
  • remuneration;
  • annual leave and personal leave;
  • confidential information obligations;
  • intellectual property obligations; and
  • any restraint of trade or non-compete clause.

The employer ought to ensure the employment contract is clear on what the employer’s rights and obligations are as well as those of the employee. If the business falls under a certain industry or the employee works in an occupation that is covered by a modern award, then the employer must adhere to the minimum requirements under the relevant modern award. Modern awards outline various entitlements, such as: 

  • whether the employee is full-time, part-time or casual;
  • minimum rates of pay;
  • overtime rates;
  • penalty rates; and
  • allowances.

What Makes a Contract?

A contract is a legally binding agreement between two or more parties. A contact is valid if there is:

  • offer and acceptance (i.e. the employer must have communicated the offer and the employee must have accepted the terms of the offer);
  • a common intention between the parties to create binding relations (i.e. the employer and employee have agreed to establish a legal relationship on the basis of all the terms set out in the letter of offer or employment contract);
  • something promised in exchange for the promise (i.e. the employer promises to pay the employee remuneration for their work);
  • legal capacity (i.e. both the employer and employee must have the legal ability to enter into a contract)
  • consent from both parties (i.e. neither the employer nor the employee may be coerced into consenting)

As the name suggests, a letter of offer is likely to be considered an “offer”. It may not yet be considered a contract with an employee until the above elements are also met. Once they are met, you will have a binding contract. It can be quite confusing for employees if they only receive a letter of offer with no terms and conditions attached. For many businesses, it is beneficial to attach a clear employment contract to the letter of offer. As with a letter of offer, an employment contract is only legally binding if the above elements are met.

You can also form contracts verbally if you satisfy the factors here. Ideally, however, businesses should enter written contracts with employees to avoid any uncertainty in the arrangement.

Key Takeaways

An offer letter or employment contract may be a contract, depending on whether it meets the elements of a binding contract. Employers should provide both an offer letter and an employment contract when engaging employees. Employers should make sure all rights and obligations for both employers and employees are set out correctly in an employment contract. If you need help with drafting letters of offer and employment contracts, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Rowan O'Neill
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards