Find out what is contained in an employee compensation agreement and check out a free sample.

An employee compensation agreement is created to supplement an existing employment contract when the payment structure is changed. This prevents the need to create another employment contract since other terms remain the same. The agreement stipulates the new payment structure, making it clear what the employee should be paid. It is also useful in cases where employees receive performance bonuses, commissions, stock options and executive salaries for managers.


Contents of an employee compensation agreement

Employer and employee information. Here there are the names and addresses of the employer and employee.

Employment contract information. This section has information regarding the main employment contract such as the date it was executed and if it has another compensation agreement.

Dates. Here is where the date when the agreement is signed appears. However, it does not mean it is the day the agreement takes effect since that is specified under the terms.

Terms of the agreement. The agreement terms are stipulated in this section. These include when the agreement starts and ends, the type of compensation such as salary, bonus, overtime and vacation time. Others terms may include the law governing the agreement and terms for modifying.

Signatures. The employee and a representative of the employer such as a manager append their signatures here to show agreement with the set terms. The date of signing is also included.

Sample compensation agreement

This is compensation agreement dated […] between

(Employer) and

(Employee)

This agreement is not a replacement of the employment agreement, but it supplements it.

The parties agree to the following:

  1. This agreement amends the employment agreement compensation terms.
  2. This agreement is for one year starting from […] to [….]
  3. The employee will receive a commission on the sales at 10%.
  4. The employees will be paid an hourly rate of […] per hour starting from […]
  5. The employee will be paid a monthly salary of [….] for the duration of this agreement.
  6. As long as this agreement is in force, the payment will be made every two weeks.
  7. The laws of California will be used to enforce this agreement while disregarding other conflicting laws.
  8. The employer will deduct any remittances and deductions specified in the law.
  9. This agreement shall not be modified or amended except with a written agreement by the (employee) and (employer).

This agreement is executed in witness of

Employer: Signature [….] Date [….]

Employee: Signature [….] Date […]

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