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COMPENSATION AGREEMENT

THIS COMPENSATION AGREEMENT (this "Agreement") dated this ________ day of ________________, ________

BETWEEN:

______________________________ of ______________________________________
(the "Employer")

OF THE FIRST PART

- AND -

______________________________ of ______________________________________
(the "Employee")

OF THE SECOND PART

BACKGROUND:

  1. The Employer and the Employee entered into an employment agreement (the "Employment Agreement") dated November 23, 2024, as amended.
  2. This Agreement does not replace the Employment Agreement but is a temporary supplement to it.

IN CONSIDERATION OF and as a condition of the parties entering into this Agreement and other valuable consideration, the receipt and sufficiency of which consideration is acknowledged, the parties to this Agreement agree as follows:

  1. The terms of the Employment Agreement, as amended, are amended by this Agreement.
  2. The Employee will receive an hourly wage of $_____________________________.
  3. The Employee's compensation will be payable twice per month while this Agreement is in force. The Employer may deduct from the Employee's compensation any deductions or remittances required by law.
  4. This Agreement is effective from November 23, 2024 until November 23, 2024.
  5. The terms of the Employment Agreement apply to this Agreement, except where the context requires otherwise.
  6. This Agreement takes precedence over the Employment Agreement unless a new employment agreement or similar agreement is later created.
  7. On the termination or expiry of this Agreement, the Employee's compensation will be set according to the employer's policies and procedures.
  8. Miscellaneous Terms
  9. The Employer and the Employee acknowledge that this Agreement is reasonable, valid and enforceable. However, if a court of competent jurisdiction finds any of the provisions of this Agreement to be too broad to be enforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable.
  10. In the event that any of the provisions of this Agreement will be held to be invalid or unenforceable in whole or in part, those provisions to the extent enforceable and all other provisions will continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Agreement and the remaining provisions had been executed by both parties subsequent to the removal of the invalid provision.
  11. All negotiations and understandings have been included in this Agreement. Statements or representations which may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final agreement. All such statements are unenforceable. Only the written terms of this Agreement will bind the parties.
  12. Any amendment or modification of this Agreement or additional obligation assumed by either party in connection with this Agreement will only be binding if evidenced in writing signed by each party or an authorized representative of each party.
  13. Time is of the essence in this Agreement.

IN WITNESS WHEREOF, the parties have duly affixed their signatures under hand and seal on this ________ day of ________________, ________

EMPLOYER:

_________________________ (Print)

Per:______________________(SEAL)



EMPLOYEE:

______________________________

_________________________ (Print)

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Last Updated September 12, 2024

Written by 

Samantha Oro

Full Bio
LawDepot's Editorial Policy

Reviewed by 

Jeseth De Vera

Full Bio
LawDepot's Editorial Policy

|

Fact checked by 

Kyle Adam

Full Bio
LawDepot's Editorial Policy


What is a Compensation Agreement?

A Compensation Agreement is a contract between an employer and an employee that records a change in wages or earning potential. 

It’s an important document when managing and retaining employees. When you change your employee's compensation, this agreement can cover complex amendments like a new commission formula to a simple hourly wage increase.

A Compensation Agreement is also known as a:

  • Remuneration agreement
  • Salary agreement
  • Wage agreement

Compensation Agreements versus Employment Contracts

An Employment Contract covers employment terms such as hours, notices, and responsibilities. It’s agreed upon and signed when you’re onboarding a new employee. It may also outline the initial probationary period and compensation employees receive when they begin the position. 

You introduce a Compensation Agreement during an employment term. It’s a supplementary form to an Employment Contract, as the agreement doesn’t replace the whole contract. It simply updates the compensation terms for a current employee when you change wages, bonuses, and non-monetary compensation.

When do I use a Compensation Agreement?

You can use a Compensation Agreement when you make changes to your employee’s earnings. These changes can include:

  • Raises: When you give an employee a raise or they complete a probationary period, use a Compensation Agreement to document new earnings. For example, your employee may start at minimum wage and receive an hourly increase after a strong evaluation. 
  • Promotions: When you offer an employee a promotion, your agreement will outline the new wages or salary as they move up in the company. The agreement may also include new non-monetary compensation, like paid vacation days, that their new position offers.
  • Commission changes: When an employee’s commission rate changes, a  Compensation Agreement can outline a new commission formula or percentage they’ll earn. This kind of compensation can be for employees such as salespeople, agents, or advisors. 

LawDepot’s Compensation Agreement template asks you to provide a start and end date for compensation changes. If you’re looking to make a permanent change to an employee’s contract or compensation, use our Contract Addendum or create a new Employment Contract.

Why should I use a Compensation Agreement?

A Compensation Agreement is a key part of employee management. It documents the changes you are making to an employee’s earning potential. It goes on further to help with managing employees to:

Create transparency

An agreement clarifies the compensation changes taking place for an employee. It ensures both parties know what is expected for wages, salary, paid time off, and more in return for the work provided.

Motivate and retain staff

Providing compensation details can encourage employees to continue providing quality work. Bonuses and new potential earnings laid out during a promotion or following a yearly review may promote employee retention.  

Avoid disputes 

Having agreements in writing greatly benefits you and your employees as it clearly defines the compensation they can expect. 

You should avoid verbal agreements as they’re difficult to prove later if a conflict occurs and is taken to court. Either party may recall the terms and wages differently, which can delay any resolution. Overall, written agreements provide a legally valid record to protect you and your employees.

How to write a Compensation Agreement in 4 easy steps

LawDepot’s Compensation Agreement template is customizable to make it easy for you to document your employee’s new compensation. Once you select the date of the original Employment Contract, complete the following steps.

1. Provide the parties’s details

Give the full details for you and the employee receiving a change in their compensation. Employer’s details can be an individual or organization.

2. Include the compensation details

Next, provide all the details about your employee's new compensation. This includes:

  • How your employee will be paid (e.g., hourly or salary) 
  • How much your employee will earn
  • How often your employee will be paid (e.g., at the end of the month or bi-weekly)

If there are additional changes, such as vacation time and overtime, be sure to include these details to create a thorough agreement.

3. Select the agreement period

Continue with selecting a start and end date for your agreement. Include how your employee’s compensation will be set following the end of the agreement. This can be according to your employer's policies or employment agreement. 

If you have an existing Compensation Agreement, provide the date for that contract. Your newly signed agreement will terminate the older one.

4. Add any additional clauses and signing details

Finally, complete your agreement with any additional clauses and a signing date, if you’ve determined one. Our template lets you include any additional clauses that may apply to your situation.

Related Documents:

  • Employment Contract: Outline an employment relationship by detailing the rights, responsibilities, and obligations of the employer and employee.
  • Employment Offer Letter: Create a formal acknowledgment offering an employee candidate a position with a company.
  • Employee Evaluation: Create a written record while reviewing an employee’s performance.
  • Employee Warning Letter: Write a formal warning for an employee breaching company protocol or policy.
  • Employment Termination Letter: Formally inform an employee of their termination in writing.
  • Independent Contractor Agreement: Write out the terms and conditions for hiring a contractor or freelancer to perform a job or provide a service.
  • Contract Addendum: Modify a contract by adding, replacing, or canceling existing terms within an agreement.
  • Proof of Income Letter: Verify an employee’s income and employment status for rental, insurance, mortgage applications, and more.
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