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An offer letter is a preliminary proposal you send after choosing a candidate. It's short, it's conditional, and on its own it doesn't create the full statutory employment relationship. The appointment letter, once both sides sign it, is what actually forms a binding contract of employment under Section 10 of the Indian Contract Act, 1872. An employment agreement does the same legal job as a fuller, more detailed appointment letter. The term just tends to get used for more heavily negotiated senior or equity-linked roles. Send a candidate only an offer letter, and you haven't documented the employment relationship yet.
Most founders send an offer letter, get a signature back, and move on. That feels like the hiring is done. It isn't. An offer letter, an appointment letter, and an employment agreement are three separate documents with three different levels of legal weight, and treating the first one as if it were the third is the most common paperwork mistake we see in early hiring.
The three documents founders confuse, and why it matters
Each of these documents does a different job. Get the sequence wrong and you can end up with a candidate who accepted an offer but never signed anything that spells out their notice period, their IP obligations, or what happens if either side wants out early.
Offer letter
Appointment letter
Employment agreement
Legal weight
A proposal, binding only to the extent of what it actually states
The full, s.10-binding employment contract once both sides sign
Same binding weight as an appointment letter, used for more negotiated roles
When it's sent
Right after you select a candidate
At or shortly after joining
This article is general information, not legal advice. If you need advice for your specific situation, contact BuildWright directly.
Everything the appointment letter covers, plus IP assignment, confidentiality, restrictive covenants, sometimes equity
Is it the complete employment contract?
No
Yes
Yes
Offer letter: a conditional proposal
An offer letter states the role, a headline compensation figure, a proposed joining date, and an acceptance deadline. Once a candidate signs and accepts it, it can bind both sides under Section 10 of the Indian Contract Act, 1872, but only to the extent of what it actually says. Most offer letters stay silent on working hours, leave, probation mechanics, and notice period. That's not an oversight. It isn't the offer letter's job to cover those.
This is why an offer letter alone isn't enough. It has real legal effect. It's just a thin one.
Appointment letter: the document that actually creates the employment relationship
The appointment letter is issued at or shortly after joining. It covers the full statutory picture, and once both sides sign it, it becomes the formal, binding employment contract on the same Section 10 basis. Most state Shops and Establishment Acts, and the Industrial Employment Standing Orders framework for larger establishments, effectively require written terms of service once a business crosses a state-set headcount. This is the document a labour inspector, a court, or a former employee filing a dispute will actually look at.
Employment agreement: when you need more than a standard appointment letter
An employment agreement carries the same legal weight as a fuller appointment letter. The distinction is more about drafting depth than legal category. Founders reach for an 'employment agreement' when a role needs IP assignment language, confidentiality terms, restrictive covenants, or ESOP references that a templated HR appointment letter usually doesn't carry. A junior hire on a five-person team probably needs a solid appointment letter. A CTO writing your core product probably needs the fuller agreement.
The founder trap: sending only an offer letter and calling the hiring done
An accepted offer letter is not the same as a documented employment relationship. If a dispute comes up over notice period, IP ownership, or termination, and the only paperwork on file is the offer letter, you're negotiating from a document that was never built to answer those questions.
What the appointment letter or employment agreement should actually carry
HR-consultancy sources consistently report the same core set of particulars. Treat this as good-practice consolidation rather than a single verbatim statutory checklist: the underlying legal basis is your state's Shops and Establishment Act, plus, for larger establishments, the standing-orders framework now folded into the Industrial Relations Code, 2020.
Job title and designation
Date of joining
Place of work
Wage structure
Working hours and weekly off
Leave entitlement
Probation period
Notice period
PF/ESI and social-security details
The four central Labour Codes, the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code, are in force nationwide since 21 November 2025, with Central Rules finalised on 8 May 2026. State-level rules are still catching up unevenly, so treat day-to-day formatting mechanics as state-and-time-sensitive rather than settled everywhere at once.
Next step: free offer letter template, or get the full agreement drafted
If you're about to make an offer, start with a template that's upfront about what it is: a conditional proposal that clears the way for the appointment letter to follow. Pair it with BuildWright's employment agreement drafting service once your candidate accepts, so the actual employment relationship gets documented properly. If it's a founders' agreement you're actually looking for instead, that's a related but different document. See Founders' Agreement vs SHA vs LLP Agreement.
Not fully. An offer letter can bind both sides under Section 10 of the Indian Contract Act, 1872 once signed, but only to the extent of what it actually states, usually role, headline compensation, joining date, and acceptance deadline. It typically stays silent on working hours, leave, probation, and notice period, so it doesn't document the full employment relationship on its own.
We built a free offer letter template that's upfront about being step one toward the actual employment contract.