Appointment letter vs offer letter: clauses that matter

A surprising number of Indian small companies run on a single document called "the offer letter" that doubles as the employment contract, the policy summary and the salary annexure. It usually works until the first disagreement about notice period, probation or a bonus that was "mentioned in the interview". The fix is to understand what each document is for, and to put the right clauses in the right one.

Three documents, three jobs

The offer letter is sent before joining. It is a conditional proposal: here is the role, the pay and the start date, and here is what must happen before it becomes binding (document verification, background check, acceptance by a date). It expires if not accepted. It is short.

The appointment letter is issued on or shortly after the joining date. It is the employment contract. It carries the full terms: designation, reporting, probation, compensation, hours, leave, notice, confidentiality and the policies that apply. It is signed by both sides and filed.

The joining letter is the employee's own letter confirming that they have reported for duty on a given date and accept the terms. Many companies replace it with a signed acknowledgement on the appointment letter itself, which is simpler.

Clauses an appointment letter needs

1. Designation, department and reporting manager. State the designation exactly as it will appear on the payslip and in the HR system; mismatches cause trouble at exit.
2. Date of joining and place of work. Name the city and office. If the role is hybrid or remote, say so and reference the hybrid policy rather than describing it.
3. Probation and confirmation. The period, typically three to six months, what happens at the end (written confirmation, extension once, or separation) and the shorter notice period during probation. See our guide to probation and confirmation.
4. Compensation, by reference to an annexure. The letter states the annual cost to company; the annexure breaks it into components. Keep variable pay and its conditions in the annexure, with the measurement period and payout timing written down.
5. Working hours and weekly off. As per the applicable Shops and Establishments Act, and the company's attendance policy.
6. Leave. Reference the leave policy rather than listing entitlements, so policy changes do not require amending every contract.
7. Notice period. For both sides, after confirmation and during probation, and whether notice can be bought out at the company's discretion.
8. Confidentiality and intellectual property. Work product belongs to the company; confidential information stays confidential during and after employment.
9. Policy acknowledgement. The employee agrees to abide by the employee handbook and the company's policies, including the prevention of sexual harassment policy and the code of conduct, as amended from time to time.
10. Background verification and documents. Employment is subject to satisfactory verification of the documents listed in the employee document checklist, and misrepresentation is grounds for termination.
11. Termination for cause. A short clause reserving the right to terminate without notice for proven misconduct, following due process.
12. Governing law and jurisdiction. The courts of the city where the company is registered.

Clauses to leave out

Post-employment non-competes. Section 27 of the Indian Contract Act makes agreements in restraint of trade void, and Indian courts have consistently refused to enforce clauses that stop an employee from working for a competitor after leaving. A non-compete clause in an appointment letter is therefore unenforceable and signals to a careful candidate that the company does not know this. Confidentiality and a reasonable non-solicitation of clients or colleagues during the notice period are a different matter and are generally upheld.

Training bonds with disproportionate penalties. A bond that recovers genuine, documented training costs can be enforced; a bond demanding six months' salary for leaving within two years is a liquidated-damages clause a court will cut down. If you must use one, keep the amount tied to real cost.

Policy detail. Leave counts, holiday lists, reimbursement limits. These belong in the handbook and its annexures.

Template: offer letter

[Company letterhead]

Date: [Date]

Dear [Candidate name],

We are pleased to offer you the position of [Designation] in the [Department] team at [Company name], reporting to [Manager name and designation], at our [City] office.

Your annual cost to company will be ₹[Amount], as detailed in the attached compensation annexure. Your proposed date of joining is [Date].

This offer is subject to satisfactory verification of your documents and background, and to your acceptance of the terms set out in the appointment letter that will be issued on joining. Please sign and return a copy of this letter by [Expiry date], after which the offer will lapse.

We look forward to working with you.

For [Company name],

[Signatory name], [Designation]

Accepted: [Candidate signature and date]

Template: appointment letter

[Company letterhead]

Date: [Date]

Dear [Employee name],

We are pleased to appoint you as [Designation] in the [Department] team with effect from [Date of joining]. You will report to [Manager name] and be based at our [City] office.

You will be on probation for [Number] months. On successful completion you will be confirmed in writing; the company may extend probation once for up to [Number] months.

Your compensation is set out in Annexure A. Working hours, weekly off, leave and other conditions are as per the company's policies and the employee handbook, as amended from time to time, which you agree to abide by, including the prevention of sexual harassment policy.

During probation, either party may end this employment with [Number] days' notice; after confirmation, with [Number] days' notice or salary in lieu at the company's discretion. The company may terminate without notice for proven misconduct, following due process.

All work product created in the course of your employment belongs to the company, and you will keep confidential information confidential during and after your employment.

This appointment is subject to satisfactory verification of your documents and background. This letter is governed by the laws of India and the courts of [City].

Please sign and return a copy in acceptance.

For [Company name],

[Signatory name], [Designation]

Accepted: [Employee signature and date]

Issue, sign, file

Generate the letter from the employee's record rather than retyping it, have both copies signed, and store the signed version against the employee's file in your document centre. Six months later, the probation review starts from this letter. Two years later, the exit does too.

This article describes common practice and general legal provisions, not legal advice. Have your standard appointment letter reviewed by a lawyer familiar with the laws of your state.