Free Compensation Agreement

A document outlining the details related to a change in wages or earning potential for an employee.

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It is fairly common for businesses to hire employees at a lower pay rate during a probationary period. Or, perhaps, the length of time an employee has been with the company warrants a raise. Either way, you may adjust an employee’s rate of pay through a Compensation Agreement.


With a Compensation Agreement, you can formally record changes to an employee’s compensation. Think of it as an amendment to the original employment agreement. This document can also be used to provide your employee with non-monetary compensation like additional vacation days.

Frequently Asked Questions


A compensation agreement is a legally binding document that outlines the details related to a change in wages or earning potential for an employee. 



If you need to update a change in an employee’s compensation, using a compensation agreement is a formal way to record that change in compensation. 


A compensation agreement is often used after an employment contract is already in place and a probationary period or employment anniversary has already passed.


You can use the compensation agreement to provide your employee with additional bonus opportunities or non-monetary compensation, like additional vacation time.

To create your Compensation Agreement, provide:

  • Effective Date - Enter the date the agreement will go into effect.

  • Governing State - Select which State’s laws will control the terms of the agreement.

  • Term - Specify how long the agreement will last.

  • Company Details - Give the name of the employer and the identity of the person that will sign the contract on the employer’s behalf;

  • Employee Information - Enter the name of the employee;

  • Employment Agreement - Give the name of the employment agreement and the date that it was entered into.

  • Existence of Previous Compensation Agreements - Note if a compensation agreement was previously executed by the employer and employee.

    • Any previous compensation agreement in place, including the original terms of compensation that may be contained in the employment contract, will be superseded by this compensation agreement.

  • Method of Compensation - Choose between wages, salary, and commission and specify the rate of compensation.

  • Additional Compensation - In addition to the employee’s standard rate of compensation, there are specially allotted paragraphs for overtime compensation and vacation time. If there are any additional types of compensation that the employee will receive, such as a bonus, they should all be specified in the all-purpose paragraph titled “additional compensation.”

  • Reason - Give the reason why this agreement is being created.


Our propriety form generator will assist you in creating your customized Compensation Agreement within minutes. Answering the questions is not complicated – you only need to know the basics of the deal and the information of the other party involved.

Once you complete the questionnaire and place your order, it will be available for immediate download in either PDF or Word document from your secure online account.   

Generally, a compensation agreement does not need to be notarized – you only need to sign the document to make it legally enforceable. A witness may be helpful if the other party attempts to contest the document, but a notary is not necessary.


Please Note: The use of a notary ensures that no one challenges any signatures later and is a secure way to firmly establish the effectiveness of your document.