So you’ve found the ideal candidate; a candidate who was not only promising on paper, but delivered during interview and had resounding recommendations from their references. You know your team won’t be complete without them, your CEO wanted them to start yesterday and you are excited to be nearing the end of the hiring process. Now all that stands between you and onboarding your new executive hire is offer negotiation and the written acceptance of an offer letter or contract. This, the final phase of the hiring process, begins with a verbal offer.
What is a verbal offer?
A verbal offer is a formal invitation to an individual to join your organisation. It is usually delivered by the hiring manager and followed up in writing via an offer letter or contract. The verbal job offer should briefly cover the basics of the position and benefits on a broad spectrum.
It’s essential to make a verbal job offer before sending an offer letter or contract as this allows you, the hiring manager, to gauge the level of enthusiasm of your prospective new hire. It also speeds up the hiring process, informing the candidate as to your intentions and allowing them to raise any questions they might have before they receive official documentation. The candidate might verbally accept the job offer, but it is not biding until the offer letter or contract has been signed and executed. You should allow them several days to digest it and formally respond.
What to consider before extending a verbal offer?
Extending a verbal offer heralds the onset of the negotiation stage; a window of opportunity whereby components like job titles, compensation, benefits and severance pay are mediated to suit both parties. Careful offer management is mission-critical to ensure an agreement is reached in a timely fashion.
Executives are seasoned negotiators, no stranger to contracts and understand that now is their best chance to negotiate a sizeable compensation increase. There is also a high probability they will receive a counter offer from their current employer. As such, executive positions typically require a degree of flexibility when crafting an attractive offer. To facilitate this, identify which areas of the compensation package you are most willing to budge on:
- Working conditions
- Learning & development
- Severance pay
Remember to appoint a single-point-of-contact to liaise with the candidate during the negotiation period. This helps eliminate mixed messages and improves the experience for both parties.
Offer letter Vs contract. Which to use?
Employment contracts are commonly used for C-level roles, sales representatives and independent contract positions, but they are increasingly being used for senior management positions too. Contracts differ from offer letters in that they require both parties to adhere to the conditions stated in the contract, whereas in an offer letter, the employer can rescind the offer at any time. Which you choose will depend on the levelling of the role and your HR departments’ working practice, but you should never be tempted to send your new perspective executive hire both.
It’s worth reiterating that, whichever format you choose, “trust” between executive and employer is paramount to ensuring a successful working relationship and the realisation of objectives going forward. The offer letter or contract plays a significant role in establishing ‘trust’ between both parties, and any misunderstanding by either part could have serious repercussions later.
What to include in your executive offer letter
Consult with your Human Relations (HR) and Legal team when putting together a offer letter, but as a minimum, an executive offer letter should include:
- Job Information, including official title, department/function and Line Managers name.
- Employment type, clarifying employment status for legal and tax purposes.
- Job requirements, defining responsibilities, duties, work schedule and core objectives.
- Compensation package, stating salary/rate, bonuses, incentives and pay review procedure.
- Benefits, including which are taxable, which are reimbursable the percentage the employee contributes.
- Schedule and employment period, including start date, expected working hours and flexible working arrangements.
- Annual leave and absence policy, including whether the employee can accrue days.
- Company policy, including what policies apply and how they can find out more about them.
- Confidentiality agreement, clarifying the type of data and information the employee will be working with.
- Non-compete cause, stating any restrictions or regulations after the employee has left the organisation.
- Statement of at will, reiterating that the organisation or employee can terminate the relationship at any time.
- List of contingencies, including background checks, reference checks and proof of the employees right to work.
What to include in your executive contract
An executive contract is a binding legal document which elaborates upon much of the information presented in the offer letter, with the following additions:
- Full job description
- Assignment of developments
- Conditions for termination
- Severance and termination provisions
Though defining the wording of the contract should be left in the hands of a component legal specialist, we have summaries which each component entails below.
Full job description
Not just a summary, but the entire job description detailing the goals, responsibilities, duties, skills, experience and competencies necessary for success in the role. This should be updated to reflect any changes in remit that might have occurred as a result of organisational changes during the course of the hiring process or adjustments brought about by offer negotiation.
Conditions for termination
The rules and policies for termination of the contract need to be specified in detail. This should include information as to the notice period and what is required for either party to terminate the contract. If the executive contract includes a confidentiality agreement, the termination terms will include a clause that all copies of work and data must be permanently deleted or returned to the company. Following termination of employment, having the process, terms and conditions documented should help to maintain a positive relationship for both parties.
Severance or outplacement plan information
If applicable, the severance payment includes a lump sum of money accumulated from remaining pay, accrued vacation or sick days and any other benefits or compensation outlined. For more information on executive severance packages, including whether you should offer them and the implications for your company, check out this excellent article from CareerMinds.
How to handle compensation negotiation
Successful offer negotiation can make-or-break your offer of employment. It should be approached from a win-win scenario, the desired outcome being a content and motivated new starter. However, this can’t come at the expense of the company. Paying more than you can afford or disproportionately to established pay ranges is bad for the employee, and bad for business.
When deciding which components you are willing to negotiate, the following factors will determine your leeway:
- Candidate desirability – If the candidate is a ‘must have’, you may be a little more lenient in negotiations so that you can guarantee their employment.
- Skills scarcity – If the skills and experience you are seeking are hard to find, you may need to compromise so you don’t have to restart the hiring process.
- Market conditions – If the economic climate is hostile or the the company is undergoing a transformation, compensation limits might be restricted.
- Position – If the position you are trying to fill is a pivotal role, you want to fill it as quickly as possible to minimise the impact on the wider business.
- Compensation limits – If the candidates desired salary is way above that of organisations salary ranges, you may need to reconsider.
Once negotiations are complete and both parties are happy, it is time to finalise everything. Depending upon the outcome of the negotiation, a new offer letter or contract may need to be issued with the basic terms and conditions both parties have agreed upon, and this should then be signed by the perspective employee.
With the offer letter or contract signed, you’ve secured your new executive hire. Congratulations! However, while the hiring process has come to fruition, the executive onboarding process is just beginning. How you help them integrate with the wider organisation and get up to speed quickly will ultimately determine their performance and long-term success. Good luck!
Disclaimer: The information provided is for ideas and assistance. Please seek legal assistance to ensure your interpretation and decisions are correct for your locality.
For more hiring advice tailored to hiring managers in the life science industry…
- Read Tough Reference Checks Techniques For Life Science Executives.
- View our executive search solutions to see how we can help you gain a competitive edge through talent.
* Fraser Dove International is a specialist executive search firm operating exclusively in the Life Science industry. Passionate about people, we take pride in helping exceptional life science organisations source the talent they need to design, manufacture and distribute life-changing drugs, treatments and devices which transform and save patient lives.