How To Write A Contract Letter: Everything You Need to Know
If you want to learn how to write a contract letter, you’ll first need to understand the purpose of the letter, along with the other party involved in the contract. 4 min read updated on February 01, 2023
How to Write a Contract Letter
If you want to learn how to write a contract letter, you’ll first need to understand the purpose of the letter, along with the other party involved in the contract. The contract letter represents the beginning stages of an official employment relationship between a business and an employee. Therefore, it is important to draft a detailed and thorough contract letter so that the new employee is fully aware of his or her obligations and duties.
The contract letter should specify the responsibilities of both parties to prevent potential legal disputes from arising. For example, the contract letter should not leave any room for negotiation, as the new employee should be able to read the contract and fully understand his or her rights. The negotiations should take place before the contract letter is drafted, and any ambiguous terms should be discussed prior to this letter, too.
Another example of when you might want to write a contract letter is for a home improvement project. For example, if you are hiring a contractor to complete a project in your home, you can draft this letter, which will provide information on the scope of the work, length of time, costs, and materials associated with the project. Ensure that both you and the contractor sign the document, as it will then become a legally binding document.
What to Include in a Contract Letter
There are several elements that should be included in a contract letter, including the following:
- Position title
- Company name
- Starting date
- Employee’s status as a full-time, part-time, or contractor employee
- Whether the employee will be exempt or non-exempt
- Amount of pay
- When the employee will be paid (bi-weekly, weekly, etc.)
- Company benefits
- Paid time off information
- Organizational structure
- Probationary period information, if applicable
- Conditions of employment, if any
- Unambiguous language stating that the employee is entering into an at-will contract, if applicable
You’ll want to be clear as to whether the employee will be a full-time or part-time employee, while also providing information as to how many hours per week the employee should work, particularly for part-time employees.
The base salary is also another key component to include in the contract letter, as this could be different if you hire a non-exempt employee. Also ensure that you are clear as to how many PTO days the employee has, and include whether or not the employee will be off from work on certain holidays.
The company benefits section should entail all benefits being offered to the employee, including such benefits that won’t be offered until the employee has worked for your company for a certain period of time. This can include 401k investing, commuting reimbursement, internal and external training, etc.
Guidelines for Letter of Agreement
There is no specific format in which the letter must be arranged. But there are some helpful guidelines that can assist you when you are ready to draft the contract letter. For example, it might be a good idea to first identify the nature of the project. Assuming you are drafting a contract letter not for an employment contract (business-employee) but rather as a homeowner hiring a contractor to engage in a home renovation. You’ll want to identify the nature of the overall project, which can include what you expect from the contractor, how you want the place to look after the project is over, and what type of materials you want to be used.
Next, you should identify the type of product that you expect to be delivered. This could include photographs of how you want the home to look, i.e., kitchen or bathroom remodeling.
You’ll also want to include the length of time and costs associated with the project. For example, when do you want the work to be completed? How many hours will the contractor be required to work on the project? Do you want him or her to come on the weekends? What happens if the project takes longer than expected? What happens if more materials are required? All of this information should be detailed in the contract letter.
Moreover, how payment will be made is also noteworthy. For example, do you want the contractor to accept payment in cash, credit card, or check? Before detailing how you want to pay, you should speak to the contractor, as he or she might have certain conditions for payment. Some contracting companies require that you submit a check, and simply do not allow payment via credit card. This is particularly true for small businesses.
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