Offer Letter Review Guide

What it is

An offer letter is a short contract — typically one to three pages — that an employer sends a candidate to confirm a job offer. Once you sign and return it, you're bound by its terms.

Most offer letters reference longer documents you should also read: an Equity Plan, an Employee Handbook, an IP Assignment Agreement, a Confidentiality Agreement, and sometimes a Non-Compete or Non-Solicit. The letter binds you to those documents even if you didn't see them up front.

Offer letters are governed by the labor laws of the state (or country) where you'll work. Same words can mean different things in California vs. Texas vs. New York.

Common clauses to check

1. [ 01 ]

   Compensation structure

   Your base salary, signing bonus, target bonus, and commission. The letter should state each as a clear annual or per-period number.

   What to look for

   • Base salary stated as an annual number plus payroll frequency (e.g. "$120,000/year, paid bi-weekly").
   • Signing bonus paid as a lump sum or split — and on what schedule.
   • Target bonus expressed as a percentage of base, with the conditions for paying it.
   • Commission plans stated by reference to a separate Sales Comp Plan you've actually seen.

   Red flags

   • Signing bonus clawback if you leave before 12–24 months — sometimes 100% repayment.
   • Target bonus described as "discretionary" with no metric — that's marketing copy, not pay.
   • Commission caps, draws against future commission, or delayed payment past separation.
2. [ 02 ]

   Equity grant

   Stock options, RSUs, or restricted shares. The letter usually only previews the grant; the binding terms live in the Equity Plan and your individual grant agreement.

   What to look for

   • Number of shares (or share class) and grant type — ISO, NSO, or RSU.
   • Strike price (for options) tied to the most recent 409A valuation.
   • Vesting schedule stated explicitly — e.g. "4 years, 1-year cliff, monthly thereafter."
   • What happens at termination — exercise window for options, treatment of unvested.

   Red flags

   • Vesting longer than 4 years — common in late-stage private companies, expensive in time.
   • Single-trigger acceleration only (vesting accelerates only on a sale event) with no double-trigger (sale + termination).
   • 90-day post-termination exercise window — industry standard but punishingly short if your shares are valuable; some companies offer 7–10 years.
3. [ 03 ]

   Vesting schedule

   When you actually own each share. The default in tech is 4-year vesting with a 1-year cliff, then monthly.

   What to look for

   • Cliff length (typically 1 year). Nothing vests until the cliff.
   • Vesting cadence after the cliff — monthly is friendliest, quarterly is common, annual is rare and bad.
   • Treatment of vesting if you leave on a specific date (last day worked vs. notice period).

   Red flags

   • 5+ year vesting schedules.
   • Back-loaded vesting (more shares vest later, locking you in).
   • Performance-based milestones that the company controls.
4. [ 04 ]

   At-will employment

   In most U.S. states, employment is "at-will" — either side can terminate at any time, with or without cause. The letter typically restates this explicitly.

   What to look for

   • An at-will clause is standard in U.S. offers. It is not negotiable for most roles.
   • Severance commitments that override at-will (a fixed-term agreement, or a notice period commitment).
   • Carve-outs for the company's right to terminate "for cause" with no severance.

   Red flags

   • A "for cause" definition broad enough to cover any company complaint (e.g. "any breach of company policy") — narrow this if you can.
   • No notice period at all — even 14 days helps you transition.
5. [ 05 ]

   IP assignment

   You agree that any IP you create related to the company's business belongs to the company. Almost every offer requires this; the question is how broadly it sweeps.

   What to look for

   • Carve-out for IP you created before joining (Schedule A or similar — list it).
   • Limitation to work created using company resources or in scope of your duties.
   • State-law protections — California Labor Code §2870 protects employee inventions made on personal time without company resources.

   Red flags

   • Assignment of "any and all" IP including work made on personal time.
   • No carve-out for prior inventions or open-source side projects.
   • Continuation of the assignment past your last day of employment.
6. [ 06 ]

   Non-compete & non-solicit

   Restrictions on what you can do after you leave. Heavily state-dependent — California refuses to enforce most non-competes, others enforce them aggressively.

   What to look for

   • Geographic scope, time period (12 months is common; 24 is aggressive), and definition of competitor.
   • Non-solicit of customers vs. employees — narrower is better.
   • Whether the restriction applies if the company terminates you without cause.

   Red flags

   • Worldwide geographic scope (rarely enforceable but creates legal cost).
   • Vague competitor definition ("any business that engages in similar activities").
   • Non-solicit covering clients you never personally interacted with.
7. [ 07 ]

   Severance

   What you get if the company terminates you. Often absent from junior offers; common in senior/exec offers.

   What to look for

   • Number of weeks/months of base salary on termination without cause.
   • Continuation of benefits (COBRA reimbursement) for the severance period.
   • Pro-rated bonus through the termination date.

   Red flags

   • Severance conditioned on signing a release of claims (standard) AND extensive non-disparagement (less standard).
   • Severance forfeited if you breach any restrictive covenant — even a contested one.
8. [ 08 ]

   Signing bonus clawback

   If you receive a signing bonus and leave within a defined window, you may have to repay it. Read the trigger.

   What to look for

   • Clawback period (12 months is standard; 24 is aggressive).
   • Whether clawback applies on termination by the company without cause (it should not).
   • Pro-rated repayment vs. all-or-nothing.

   Red flags

   • Full repayment regardless of how you leave (including layoff).
   • Clawback triggered by joining "any competitor" — combines two restrictions to keep you locked in.

Other watchouts

• Start date and any contingencies (background check, reference check, drug test, immigration status).
• Title and reporting structure — title is tied to comp band; reporting line affects your day-to-day.
• Remote/hybrid policy stated in writing, not just promised verbally.
• Relocation package — gross-up for taxes, repayment if you leave early.
• Arbitration clause — most U.S. offers include one. It limits class actions and jury trials.
• Confidentiality and non-disparagement that survives termination.

Frequently asked questions

Should I have a lawyer review my offer letter?

For routine roles under ~$150K total comp, most people sign without legal review. For senior or exec roles with meaningful equity, restrictive covenants, or unusual severance, a 30-minute call with an employment lawyer is worth the $300–600 it costs.

Can I negotiate an offer letter after signing?

Technically yes — anything in a contract can be amended by mutual agreement. Practically, your leverage drops sharply once you sign. Negotiate before signing, when you still have the option to decline.

What is at-will employment?

At-will means either party can end the employment relationship at any time, for any legal reason or no reason, without prior notice. It applies in most U.S. states by default and is usually restated in offer letters.

Is a verbal offer binding?

Generally no — most U.S. employers require a signed offer letter to bind themselves. Until you have a signed letter (or accepted email offer with clear terms), the offer can be revoked.

What's a 1-year cliff in vesting?

Nothing vests for the first 12 months. On day 365, 25% (one full year of vesting on a 4-year schedule) vests at once. Then the remaining 75% vests monthly or quarterly. If you leave before the cliff, you get nothing.