Hiring Your First Employee

So you're ready to make your first hire!

Hiring the right people is one of the biggest drivers of your company’s growth. Once you've locked in the right person (perhaps testing them out first as a contractor) you're ready to send your offer letter.

A clear, well-drafted offer letter sets expectations early, protects your business, and helps you attract top talent.

Many startups overlook this step or rely on ad-hoc documents. That might work, but frankly it's a bad look, and comes with risks.

New hires should receive a consistent, professional offer letter that clearly defines their role, compensation, and employment terms.

1. Why Use an Offer Letter?

You might be wondering why use an offer letter, as opposed to an employment agreement.

That's because those are different documents entirely. Offer letters are typically short documents containing very basic terms and conditions of employment, typically used for "at-will" employees, where the relationship can be more easily severed.

Employment agreements on the other hand, are a lot lengthier, and are typically more robust, containing terms that don't apply to the run-of-the-mill employee.

If you're hiring an executive for the long-term, and want to ensure all basis are covered use an employment agreement. Otherwise, an offer letter will provide your startup with more protection (on top of being easier to use).

2. Keep Offer Letters Short but Complete

Your offer letter can be simple. Usually two pages is enough. But it must include the key terms that govern employment.

To help make things simple, you should keep on hand short-form templates for different categories (exempt, non-exempt, full-time, part-time, or temporary).

For executives or special arrangements, expand the template to include items like relocation packages, bonuses, commissions, severance, or change-of-control provisions.

3. What Every Offer Letter Should Include

Basic Terms

• Position and supervisor: List the employee’s title and who they report to.
• Schedule: State whether the role is full-time, part-time, or temporary, and outline the general work schedule.
• Work location: Specify where the employee will work (office, hybrid, or remote) and note any location requirements.

Classification and Pay

• Exempt vs. non-exempt: Confirm whether the employee is exempt from overtime under federal and state law.
  • Exempt employees (typically paid fixed salary) are not eligible for overtime pay.
  • Non-exempt employees (typically paid hourly) must record hours worked and receive overtime for approved extra hours.
• Base salary: Quote hourly rates for non-exempt employees and pay-period or annualized amounts for exempt employees. You should clarify that compensation can change at the company’s discretion.
• Bonuses and commissions: Briefly describe how they are calculated and when they are paid. Make clear that they are discretionary unless governed by a written plan. Typically, if the employee is commission based, you will want a separate document laying out the specifics.
• Equity: If offering stock or options, outline the number of shares and vesting schedule, and state that the grant is governed by the company’s equity plan and grant agreement.

Benefits and Policies

• Benefits: Reference standard company benefits (health insurance, vacation, sick leave, holidays) and note that details are in the plan documents, which may change over time.
• Company policies: Make employment subject to the employee handbook and other company policies, as amended from time to time. If you don't have an employee handbook, it is strongly recommended that you put one together.

Employment Status and Legal Terms

• At-will employment: State clearly that employment is at-will and can be ended by either party at any time, with or without cause or notice. Avoid language implying a guaranteed term.
• Confidentiality and IP: Require the employee to sign a confidentiality and invention assignment agreement before starting. Include non-compete or non-solicit terms only if permitted by state law (California, for instance, doesn't look kindly on non-competes).
• Prior employer restrictions: Prohibit use or disclosure of another company’s confidential information and require disclosure of any existing restrictive covenants.
• Contingencies: If needed, make the offer conditional on satisfactory background checks, references, and proof of work authorization.
• Dispute resolution: Arbitration clauses help to resolve employment claims quickly and privately.

4. Common Mistakes to Avoid

• Over-promising job security or long-term employment. Even phrases like “we look forward to many years together” can undermine at-will status.
• Misclassifying employees. Improper exempt/non-exempt classification leads to costly wage claims. Make sure you understand the type of employee they are, review their job duties, and consult counsel before finalizing.
• Vague bonus or equity descriptions. Always tie incentive pay and stock grants to written plans. You do not want to end up in a dispute about this down the line.
• Ignoring state-specific requirements. For example:
  • California requires a written wage notice for non-exempt employees.
  • New York requires a wage rate notice for all new hires.
    Your templates should address these variations.

5. Best Practice: Use Standard Templates

Create standardized templates for common employee categories and keep them updated as laws change. A good offer letter template should be:

• Legally compliant in all states where you hire,
• Easy to customize for each role, and
• Consistent in tone and format across your company.

The Bottom Line

A clear offer letter does more than confirm pay and position - it protects your company, reinforces professionalism, and builds trust with new hires.

Best practice: Keep it short, precise, and consistent. State essential terms, preserve at-will employment, and ensure supporting agreements (confidentiality, invention assignment, equity grants) are in place before onboarding.

If you’re scaling and need compliant, founder-friendly offer letter templates that you can use repeatedly, Apex Corporate Law can help you set them up quickly and correctly. Book a consultation today.