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Last Updated November 1, 2022

The Offer Letter explained

Are you thinking of hiring an employee or contractor? Are you thinking about doing this without a written letter of offer or employment contract? Before doing so, read on to find out why an employment contract and contractor agreement is required.

An employee is someone who receives payment as wages or salary, has their tax taken out by their employer, are based at your business, work at your home or are mobile, can be full-time, part-time, apprentices, trainees or casual, and can be directed when, what and how to do a task.

A letter of offer is a written agreement between an employer and an employee which is made up of terms and conditions that form part of the employment relationship. 

There are many items that can be included, but key elements of a best practice letter of offer include;

  • starting date and employment type
  • length of probation period
  • salary and benefits
  • reference to an applicable award or legislation including National Employment Standards (NES)
  • any special conditions of employment.

Some individuals are engaged on a contractor basis. A contractor or independent contractor usually doesn’t receive wages, but invoices for their work, runs their own businesses with an Australian Business Number (ABN), has their own insurance, does a set task, can subcontract their work to others and provides their own equipment, or works from their own base.

A contractor agreement is also a written agreement between an employer and a contractor, but is made up of terms and conditions that outline the exchange of a service.

There are many items that can be included in a contractor agreement, but key elements of a best practice agreement include the following;

  • definition of services or results
  • remuneration and submitting invoices
  • indemnity
  • subcontracting
  • incomplete work / non performance

Why is a written employment letter of offer or contractor agreement required? There are a few reasons such as;

  • Being an official document which should be prepared and then signed as acceptance of the offer prior to commencement. 
  • Should be issued along with supporting documentation including a position description, fair work information statement, new employee details including superannuation and tax as well as reference to policies and procedures or an employee handbook.
  • Contains legally binding aspects to protect against common issues like privacy, non compete clauses and notice periods for terminations.
  • Provides clear expectations for both the employer and employee about specific clauses, reference to any relevant awards, salary, benefits, probation and leave entitlements.
  • Can minimise costly and time-consuming disputes by providing certainty about the legal rights and obligations of both you and your employees.

In conclusion, a letter of offer or contractor agreement provides clarity and protection for both the employer and the employee.

Contact Small Business Society today for assistance with drafting a tailored agreement template for your business.

The information provided in this document is for your guidance only and is general in nature. It does not constitute as legal advice. It is the responsibility of the individual to seek legal advice where required.

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About Kate Tongue

Kate Tongue is the founding Director of Small Business Society.

She is a qualified and experienced Human Resources professional with more than 10 years of experience across the private and public sectors.

Her particular interest and experience is in managing the employee life cycle, delivering process improvements, and Human Resource strategy.

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