The Importance of a Comprehensive Offer Letter and Employment Contract

The employer-employee relationship is typically outlined before the beginning of employment. This distinction is set in both the offer letter and employment contract. These documents highlight the terms of employment and establish the relationship between the employer and the employee.

Only relying on standardised, government-issued, labour contracts such as ones from Ministry of Human Resources and Emiratisation (MoHRE) or Free Zone contracts is not enough to cover employers from a legal perspective. These often do not contain specific details and protections.

What is the role of the offer letter?

An offer letter serves as a preliminary agreement between the employer and the prospective employee. It outlines the basic terms and conditions of employment. While it is not a full employment contract, it can be legally binding. The offer letter should clearly outline key employment terms to avoid any future confusion or conflict regarding the employee’s role and responsibilities.

The information that the offer letter should cover includes:

• Job title and description (mandatory)
• Reporting structure (optional)
• Start date
• Work hours
• Other work arrangements such as flexible working hours and work from home (optional)
• Compensations and benefits
• Flight ticket (optional)
• Entitled leave
• Probation period
• Notice period
• Any travel requirements (optional)
• Bonus and commission (optional)

Providing employees with these details ensures that a clear expectation is established and reduces the chance for future misunderstandings or disputes.

Companies should be aware that anything initially offered will have to be honoured regardless of changes in legislation. For example, an annual flight ticket is no longer required by law but if an employee has this benefit listed in their Offer Letter, the company would not be able to remove this benefit without approval from the employee.

What is the role of the employment contract?

The employment contract is the legal aspect of the employment relationship. It provides a formal and legally binding written contract agreement that protects both the employer and the employee.

The employment contract should cover key elements such as:

• Job role and responsibilities
• Finalised compensation and benefits
• Confidentiality and non-competition clauses
• Termination conditions
• End of Service Gratuity
• References to other internal policies
• Other relevant terms and conditions of employment

Only relying on standardised, government-issued, labour contracts such as ones from MoHRE or Free Zone contracts is not enough to cover employers from a legal perspective. These often do not contain specific details and protections. Tailored contracts, specific to the job role and the employer, offer a wider provision of safety to employers as they ensure both parties fully understand their rights and obligations, and minimises the potential for disputes.

How does this effect businesses?

A comprehensive offer letter and employment contract reduces the likelihood of misunderstandings that can lead to disputes, dissatisfaction, and an unwanted turnover rate.

The employment landscape can sometimes be subject to vague offer letters and standardised contracts, leaving employees unsure when it comes to discussing their rights, obligations and responsibilities. Businesses that provide clear and concise offer letters and employment contracts showcase their professionalism and transparency, building trust, a fundamental element to a positive work relationship. Employees who trust their employers are more likely to be engaged and committed to their work, and often strive to exceed expectations.

Why do I need an offer letter and employment contract to comply to local labour law?

The labour laws can sometimes be complex, and it is essential for businesses to ensure that their employment documents comply with all legal requirements. This ensures that the business stays protected from potential legal issues and that the employees are treated in accordance with the law.

How Can Sovereign PPG Help?

At Sovereign PPG, we recognize the criticality and need for comprehensive offer letters and employment contracts. Our services provide detailed guidance and support with these essential documents, ensuring they are tailored to your specific business needs, and fully compliant with all applicable Labour Laws and regulations.

We have a comprehensive Compensation and Benefits guide to help Companies understand what people are being offered without the region and what to incorporate into their offers.

Employee management can be a complex with regulatory requirements. This is where the expertise of a professional corporate services provider becomes invaluable. Sovereign PPG has decades of experience assisting businesses to find the perfect solution, and dedicated teams who can advise on best practices.

If you need assistance with this or with any other related company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Saudi Arabia, Bahrain, Oman or Qatar, then please do get in touch with us on +971 (0)4 456 1761 for Dubai, or email us at hrconsultingme@sovereigngroup.com or complete the contact form below and we will be delighted to assist you.