A document extending a job offer that specifies compensation, title, start date, and equity — typically at-will and not a binding employment contract.
An offer letter is the document you give to a new employee to formally extend a job offer. It specifies the position title, start date, salary, any equity grant (options or restricted stock), benefits summary, and whether the employment is at-will. The offer letter is signed by both parties before employment begins.
Most U.S. offer letters include at-will employment language, meaning either party can end the employment relationship at any time, for any reason, with or without notice (except for reasons prohibited by law). This flexibility is important for employers and is distinct from an employment contract, which typically guarantees employment for a specified period.
The equity section of an offer letter is important: it should specify the number of options being granted, the vesting schedule (typically four years with a one-year cliff), the anticipated strike price (subject to board approval), and the type of options (ISO or NSO). Equity details in an offer letter are usually not binding on their own — the formal grant requires board approval and a separate stock option agreement — but they set expectations.