The current employment situation is tough, meaning there is intense competition for relatively few jobs — which means employers are rejecting a greater number of applicants than usual. How you reject an applicant can mean the difference between an applicant still having a positive impression of your organization, versus coming away with hurt feelings or even giving them incentive to litigate.
A well-crafted rejection letter is the safest route for external candidates who were interviewed — it assures them that they were seriously considered for the position and it keeps you from having to verbally explain, in detail, why you rejected them. In crafting the letter, it's generally best to give a neutral and non-specific reason for the rejection. After all, no employment law requires you to tell employees the reason why they weren't hired, and you don't want to get pulled into a debate over your reasons.
Here is some sample language you might want to consider using or building upon for your rejection letter:
Thank you for your interest in our organization. We have reviewed your background and experience, and although your qualifications are excellent, we have decided another candidate more closely fits the position's requirements at this time.
It was a pleasure meeting you during your interview. We wish you the best of luck in your job search.
If you believe that the applicant could qualify for other positions in your company, you might also encourage them to apply again in the future. (But don't encourage them unless you truly want them to do so!)
Also, try to personalize the rejection letter, at least marginally. Use the candidate's name, the name of the position, and refer to something you'd discussed during their interview. This will go a long way in making them feel appreciated rather than passed over.
Never provide inaccurate, misleading, or conflicting reasons for an applicant's rejection, as these can come back to haunt you; judges and juries often look askance at employers who do this, viewing it as pretext for discrimination.
Editor's Note: Ask fair, legally-correct interview questions and still get the information you need to find out whether the applicant is truly qualified for the job — Get Interviewing Made Easy: The Right Way to Ask Hiring Questions
For applicants who never even make it to the interview stage — those whom you reject based on their initial job application/cover letter/résumé — consider sending out a form letter or e-mail, thanking them for applying and stating that "other candidates more closely fit the position's requirements." For résumés/applications that arrive unsolicited, have a form letter or e-mail ready stating that no appropriate positions are available at this time.
Why bother doing any of this? Aside from being good business etiquette, a quick response can help prevent them from calling again and again to ask whether you received their materials and ask whether they are still being considered for the position. It also presents your organization in a good light; let's face it, because of the avalanche of applications they receive, most employers nowadays send no response whatsoever to applicants they're not seriously considering, so offering applicants some sort of closure sets you apart from other employers.
Internal Candidates Deserve More
While a "short and sweet" rejection letter or e-mail, as described above, is best for external candidates, internal candidates are another story.
It is actually in the employees' and your organization's best interest to be more open with them. Providing an explanation gives them something positive on which to focus — what they can do to be in a better position to attain a future promotion opportunity. If employees feel they can't move up in your organization, they will look for advancement opportunities elsewhere. Not to mention, when employees do take steps to improve professionally, they become more of an asset to your organization.
Here are some tips for an in-house rejection letter:
Provide a reason that is actionable, i.e., something they can do something about in order to make themselves a stronger candidate the next time they apply for an internal opening.
Explain to them the objective job-related factors that influenced the hiring decision.
Explain any subjective reasons that were a major factor in your decision (e.g., their supervisor didn't think they were ready to handle more responsibility). Reason: If the applicant later challenges the decision in court and you only bring up subjective reasons then, it might appear as though you made up the reasons after the fact.
Remember that your goal isn't to tell the applicant everything, but to offer them a few nuggets of advice.