Written well, a job offer rejection letter could elicit an improved remuneration offer. At the very least, it should not burn your bridges with the company that wanted to employ you. As such, it's important to take the time to write a well constructed letter that reaffirms the qualities and professionalism your interviewer saw in you before making an offer.
Know your worth
Consider your position carefully before firing off a letter rejecting your job offer. You may not be worth the type of figure you have in mind. Don't turn down a potentially promising opportunity because your salary expectations are unrealistic. Check out job sites and employment listings in newspapers to establish the going rate for professionals in your industry. Contact trade associations linked to your line of work to enquire about what you might reasonably expect to be paid. Research locally and factor in your level of experience.
If you decide to go ahead and knock back an employment offer, begin your letter formally, thanking the recruiting manager who offered you the job. Go on to say that you enjoyed meeting the people who interviewed you, and that you appreciated them taking the time to talk with you. Maintain a professional and courteous tone throughout and keep your letter concise. You don't need to write an essay.
Explain that, after careful consideration and with great regret, you've decided to decline the job offer. If you feel your wannabe employer is paying below the market rate, be honest about this, maintaining a polite and respectful tone. Write that you feel your education and experience command a higher salary. If you're currently in employment, explain that what's on offer would amount to a pay cut if this is the case. If you've received a better offer from another firm, say so, without going into too much detail.
Close your letter by writing that you would have liked to have been in a position to accept the job offer. Ask if your CV could be kept on file in case a better paying position comes up. If money really was the only sticking point, make it clear that, had the position been paying more, you would have accepted the offer without hesitation.