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Things You Must Check In Your US Offer Letter

Financial Planning Retirement Planning H1-B F-1 Green Card O-1

15 MIN READ


If you just received an offer letter for a job in the United States, you’re probably very excited! It can be tempting to sign right away. However, whether it’s your first job offer you’ve received in the US or your fifth, it’s important to go over an offer letter carefully.  

Your Offer Letter Should Contain The Essential Details Of Your Job


The basic job information in your offer letter may include the following.

  • Start date. When reading your offer letter, pay attention to your start date. If you need to relocate or go on vacation, you may have to request an extension. Your start date may also be relevant in determining when your medical insurance and 401(k) eligibility kicks in.

  • Your official job title. Your offer letter should include your official job designation and the department into which you will be reporting.

  • Supervisor. A standard offer letter will typically mention your immediate supervisor or the person you would be reporting to. There are some instances in which this information might not be available

  • Location. The letter should specify the branch or office where you will be assigned

  • Roles and Responsibilities. Your offer letter should describe your basic job responsibilities. If your boss decides to downgrade or change your roles in the future, you can reference the offer letter to remind them of what you thought you’d be doing. This does not mean you’ll necessarily have any legal recourse to force them to change your tasks or scope but it can help you lobby for change

Compensation Package, Bonuses, and Incentives

  • Base Pay. Check if the compensation package in writing matches up with the terms you agreed upon with the hiring manager. If you negotiated an annual salary and the letter lists the base pay as a bi-monthly payment (24 paychecks per year) or bi-weekly (26 paychecks per year), do the math and make sure they match up. In most circumstances, you are free to try to negotiate your salary if the numbers are lower than you expected. An employer may come back to you and refuse to negotiate or point out that they follow a very fixed pay scale. Negotiating is common the US job market and as long as you are polite in the negotiation, it can’t hurt. However, some jobs may have fixed pay and compensation may be non-negotiable. 

  • Bonuses and Bonus System. Don’t just focus on the annual salary figures, examine the bonus system as well. Make sure that any sign on or guaranteed bonus you were promised is clearly stated in your offer letter. You should look for information about whether your performance bonus will be monthly or annual, the target percentage or percentage range, and whether it is a guaranteed bonus or a discretionary bonus. If you receive a sign on bonus, make sure you understand how long you are expected to stay at the company before you are required to pay it back.

  • Retirement - 401(k) Typically, offer letters will mention whether you are entitled to a defined contribution 401(k) plan The letter may include employer matching and eligibility requirements.. It is worth asking the recruiter or hiring manager:

    • How many years do I have to work at the company to be entitled to employer matching for the 401(k)?

    • How many years do I have to work at the company until all of my employer matching contributions have vested?

  • Retirement - Pension If the company offers a defined benefit plan or pension, it will typically be mentioned in the offer letter. It is worth asking the recruiter or hiring manager:

    • How many years do I have to work at the company until I am vested in my pension?

  • Stock Options or Company Stock Compensation. Your employer may offer you stock options (ISOs), Restricted Stock Units (RSUs), or the ability to participate in the Employee Stock Purchase Plan (ESPP). 

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  • Relocation. If the job requires you to move to another city, the offer may include benefits such as reimbursement of moving expenses. Note that this amount is usually taxable to you as income.

  • Other Perks. If your job offer includes things such as a company car, corporate housing, or other perks, this will typically be spelled out in an offer letter. In some cases, these perks may be taxable to you as income. It is worth asking and researching the conditions upon which these types of perks will be taxable or tax-free.

  • Any Kind of Probation Period. If you are new to a job or you have been promoted to a new position, your employer might require probationary period. During this time, you may receive closer supervision and coaching and you may not be eligible for certain benefits like health insurance or paid time off. Probationary periods usually last for 90 days. If your employer requires a probationary period, it will typically be mentioned in the offer letter. Even if it is not, it is worth asking if there is a probationary period.

Benefits

Companies offer several perks to attract employees from paid time off and health insurance to free lunches and pet insurance. A summary of these benefits is typically included in any offer letter.

  • Paid Time Off, Sick Time, Paid Holidays. In most companies, vacation days or paid time off range from one to four weeks. Some companies even offer “unlimited PTO.” In the first year, vacation days may be pro-rated, and some companies will not allow you to enjoy your full paid time off in Year 1. The letter may also include mention of sick time and paid holidays. 

  • Medical Insurance. The date your employer’s medical coverage benefit becomes effective for you and your family should also be indicated in the offer letter. Usually, the letter will specify if your family will also be covered. If there are dental and vision insurance options, the letter should mention them.

    • It is often hard to tell the full details of an employer’s health insurance plan from the offer letter. You can ask the hiring manager or recruiter to provide you with the full employee benefits summary which can tell you things like the deductible amount, insurance carrier choices, and copays.

  • Short Term Disability. This benefit will often be mentioned in the offer letter and allows you to receive a percentage of your pay even after you run out of sick leave. It is covered by most employers and is required by some states (California, New York, New Jersey, Hawaii and Rhode Island). The length of coverage depends on your short-term disability policy, but it can range from 30 days to 1 year. 

  • Long Term Disability. If you become very ill or injured, some employers offer long-term disability which can pay 50 to 70% of your salary for a specified period of time. In most cases, employers pay for the plan but sometimes it is a shared cost plan. You may have an option to upgrade to a higher coverage plan for a few extra dollars per paycheck. Waiting periods are common with this type of disability. This is usually mentioned briefly in your offer letter. 

  • Life Insurance. Your employer may also offer life insurance which provides money to your dependents in the event of your untimely death. Typically the amount that the policy will pay is 1X your annual salary. You may be offered the option to get higher coverage if you pay a premium. This is usually mentioned briefly in your offer letter. 

  • Maternity / Paternity Leave. The Family and Leave Act, allows a 12-week unpaid leave to US employees to care for dependents under certain conditions. Some companies also offer additional maternity or paternity leave, sometimes paid, and will typically mention this in your offer letter. 

Your employer may be willing to show you the full employee benefits package, but some documents detailing the policies may be internal. If there is a policy you are particularly concerned about or interested in, there’s no harm in asking. You may also be able to read anonymous employee testimonials about certain employer benefits on the website Glassdoor.com.

Related Article: How Much Income Tax Will I Pay While Working In The US On An H-1B?

Related Article: Can I Freelance While Working On An H-1B?

Make Sure You Understand What Kind of Employee You Are

In most cases, your US employment type will be under one of the following categories: (1) At-Will, (2) Contract For A Specific Term. Your offer letter should absolutely address this. Ask the recruiter if you are unsure.

At-Will Employee or Contract Employee for A Specified Term?

When you receive the job offer, the terms will mention whether it is at-will employment or whether you will receive a contract.

At-will employment means that the employee or employer can terminate their relationship anytime for any reason with a few exceptions. An employee at-will cannot be terminated based on disability, gender, race, sexual orientation or any characteristic that is deemed unlawful. Most jobs in the United States are at-will.

Meanwhile, signing a contract with guaranteed dates will secure your employment for that period, with terms under which you can be fired or have your position changed. The contract should include reasons for termination, benefits, compensation, and responsibilities. Unless you breach the terms of the contract, the employer will not be able to fire you without legal repercussions. Receiving an employment contract should not be confused with being an independent contractor...

Employee or Independent Contractor?

A company may hire an employee or an independent contractor for the same work. It is important to know which one you are because there are significant differences between the two regarding your rights and tax obligations.

If you are an employee, the company has control over what you do in your job and how you do it. Your employer will also withhold taxes for Medicare, Social Security and income tax. You will be eligible for employment benefits such as unemployment, the family medical leave act, and voluntary benefits offered by the employer like health insurance or paid time off.

Related Article: Do Aliens Pay Taxes? 

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Meanwhile, independent contractors are self-employed. The IRS specifies that people are only independent contractors if “the payer [the employer] has the right to control or direct only the result of the work and not what will be done and how it will be done”  Labor and employment laws do not extend to independent contractors. Although you may receive an hourly or regular salary, you are not be eligible for other benefits. Independent contractors will also be responsible for paying their own taxes to the IRS which FICA taxes of 15.3% on the first $132,900 of net income plus 2.9% on the net income in excess of $132,900.

Some companies miscategorize people as independent contractors when they should be classified as employees. Companies do this to maintain greater control over hiring and firing and to save on taxes. If you think you are being miscategorized as an independent contractor, seek the advice of an experienced employment attorney to advise you of your rights. 

Your offer letter should specify if you will be an independent contractor or employee. If you are confused about whether you are an employee or independent contractor, ask the recruiter. 

Exempt or Non-Exempt Employee? 

The US Fair Labor Standards Act created two types of employment: exempt or non-exempt. Exempt employees are those who are not entitled to the minimum wage and overtime pay of 1.5 times their regular pay if they work more than 40 hours a week.

Your offer letter should specify whether you are exempt or non-exempt. If you are exempt, you will not be entitled to overtime pay. If you are classified as non-exempt, your offer letter should specify the overtime pay rate that you will receive and any conditions upon which you will receive it. 

Exempt individuals must be paid a specific salary per week. Each state has their own rules. Exempt employees fall into these categories:

  • Executive Exemption

  • Administrative Exemption

  • Professional Exemption

  • Computer Employee Exemption

  • Outside Sales Exemption

  • Highly Compensated Employees

  • Blue Collar Workers

  • Police, Fire Fighters, Paramedics and Other First Responders

Being Asked To Sign An Offer Letter Can Be Confusing

Offer letters can be exciting but also dense and full of legalese. Offer letters can include terms and conditions and you may be asked to sign an offer letter, which can be confusing and make it seem like a contract. However, offer letters are not usually a contract, except in rare circumstances. Typically signing an offer letter just means you have acknowledged the facts in the letter. It does not typically entitle you to a job. Your employer may ask you to sign a separate employment contract or they may have an employee handbook that you must follow. That said, you should ask the recruiter or hiring manager whether signing your offer letter constitutes a contract and what you are agreeing to when you sign.

Related Article: Guide To Understanding Your American Pay Stub

What is the difference between an offer letter and a job contract?

A job offer letter and a job contract may have similarities, but they are different documents. An employer expressing interest in offering you a position usually sends an offer letter containing the compensation package, a summary of the employee benefits, job requirements and expectations, and the intention to hire you. Aside from the offer letter, your employer may ask you to sign a job or employment contract or agreement. Depending on the intent and the wording of the offer letter, it may or may not be legally binding.

On the other hand, an employee contract provides more details than an offer letter. High-level positions such as managers and supervisors usually receive an employment contract. You and your employer should adhere to the conditions listed in the document which includes details such as your job description, benefits, compensation package, and other clauses.

Take Note of Special or Clauses That May Or May Not Be Included In The Offer Letter

Sometimes, offer letters include difficult legal-sounding clauses that give you a heads up about some of the conditions of remaining employed. While you may be asked to sign another document such as an employment agreement or job contract, you may encounter these clauses in your offer letter.

Confidentiality and Nondisclosure Agreements

The requirement to sign a confidentiality or nondisclosure agreement (sometimes called an NDA) may or may not be mentioned in the offer letter. This clause may only pop up in an Employment Agreement or Job Contract you need to sign. The offer letter may mention that you will need to sign an NDA. Under an NDA, you’ll agree to keep sensitive information and documents related to your company private during and even after your tenure. If you breach an NDA, you may be fired or face a lawsuit.

Non-solicit and Non-compete Clauses

Two things that may or may not be included in the offer letter are the non-solicit and non-compete clauses or notice that you will need to sign a non-solicit or non-compete agreement.

A non-solicit agreement prohibits you from soliciting your employer’s customers after you leave the company. This may be included under the non-compete clause.

Meanwhile, a noncompete clause typically forbids you from working in the same industry or in the same geographic region as your employer for a limited time. The period indicated differs from one state to another but typically it doesn’t go beyond two years. A noncompete clause could push you to relocate if you want to be in the same line of work or wait for the agreement to lapse before resuming your practice except if you are in California. 

California courts consider restrictive covenants such as non-compete agreements as null and void. In most cases, courts also extend the same treatment to non-solicit clauses so these clauses are not enforceable in the state. However, there are instances where your employer can get away with filing court petitions outside the state where these clauses are valid. 

When it comes to non-compete and non-solicit clauses, pay extra attention. Make sure that it is not too burdensome because it may impact your ability to seek work elsewhere.

Mandatory Arbitration

Some employees slip mention of an mandatory arbitration clauses into an offer letter although it’s more common to see this in a job contract. Agreeing to mandatory arbitration means that you are waiving your right to go to court if there is a dispute between you and your employer over issues such as breach of contract, wrongful termination, and discrimination. Arbitration resolves issues faster than court litigation but the evidence you can present is limited and you may not appeal the decision. 

Refusing to sign because of this clause may cost you your job. However, you may also try to negotiate the terms. You might request to have a say in choosing the arbitrator, requesting that the arbitrator disclosure of his personal and business interests, and receiving other remedies after arbitration. Tread carefully in negotiations about things like arbitration because employers take these things very seriously.

Pro Tip: In you are fired due to discrimination and have signed an arbitration clause, you may appeal to government agencies such as the Equal Employment Opportunity Commission. Although the contract prohibits you from taking the discrimination case to court, the government agency can sue the employer on your behalf.

If You Need Your Employer’s Support To Get Permission To Work In The US, Make Sure It Is Addressed In The Letter

If your employer knows you do not yet have work authorization in the negotiation phase, they may offer an employer visa sponsorship. This sponsorship offer should be in your offer letter.

Typically, employment sponsorship is for an H1-B Visa or a Person in Specialty Occupation. However, there are other types of nonimmigrant visa with employment sponsorship including H-2-A and H2-B for agricultural workers, L1-A and L1-B for inter-company transfers, and O-1A, O-1B, O-2 visa for people with extraordinary abilities and their assistants.

If you have plans to stay in the US for longer than six years, you may need a Green Card. For salaried employees, your company take care of the green card processing and legal fees for you. The employer’s promise to offer this benefit may also be included in your offer letter. 

If your job requires relocation to the US, you should make sure there is a realistic timeline. The average processing time for a regular H1-B application can range from 10 to 13 months. If you are not entitled to use OPT or STEM-OPT because you have not recently graduated from an educational program, you may have to wait to get approved to work in the US. For a premium application where your employer pays the $1,410 fee for a 15-day premium processing, the waiting time is shorter but you should always consider this before accepting the offer. Premium processing was temporarily suspended in 2018 but premium processing for all H1-B petitions resumed on March 12, 2019.

When in Doubt, Seek Professional Legal Help

Signing an offer letter can have a big impact on your future. While you go over the details,  make sure that you have a thorough understanding of the terms of your employment.

If there are clauses you are concerned about, seek a lawyer to look over your job contract or offer letter. Remember that everything, including terms in your offer letter or in a contract, may be negotiable.

Are you looking for financial advice tailored to your unique needs? Get In Touch with a MYRA Wealth Advisor today or learn about our Services.