How to Design a Compensation Statement
A compensation statement is a written agreement between an employer and an employee that specifies not just the salary and benefits (both monetary and non-monetary) given to the employee, but also the expectations the employer has for the employee. These statements should outline very clearly each of the responsibilities the employee will have, the rights and duties he is claiming and foregoing, and his compensation. Terms and requirement not outlined in the compensation statement may be difficult to add to an employment relationship later, so it is important to draft this document correctly the first time.
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Instructions
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Enter the following information onto the signed compensation statement document: the employee's name, new company position, name of company's representative and the representative's position. To avoid inadvertently creating an agreement between the employee and the company's representative in a personal capacity, specify clearly on the signature line that the company's representative is acting in a professional capacity in the stated company position.
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Outline all forms of compensation, both monetary and non-monetary, clearly and concisely. Flat salary is the easiest and most obvious number to include, but you must also include any royalties, commissions, benefits, bonuses, stock options and any other form of money that may be changing hands during the business relationship. If a number is coming from somewhere other than the company--for instance, the employer contribution to an external 401(k) plan--specify the source of the number so any inaccuracies can be easily amended.
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Specify who owns the work product made during the business relationship. For instance, clarify that the company will retain ownership rights over any innovations the employee makes during his employment, even if the innovations are not directly related to the job duties. This will protect the company in the event of an intellectual property battle later.
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Include an agreement of confidentiality in the compensation statement. As a matter of law, the compensation you pay your employee is legal consideration for any agreements made in the compensation statement. A confidentiality agreement may be unenforceable if it does not include corresponding consideration. To avoid any legal mishap later, this agreement should be included in the compensation statement.
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Incorporate a reasonable non-compete clause. If your company is in a competitive technical field, noncompete clauses will prevent your employee from taking the information and training you provided him to a competitor. While these clauses must be limited in time and scope, they can be helpful to discourage employees from providing trade secrets to a competitor when employees switch jobs.
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Sign and date the compensation statement, and retain the statement in the employee's employment file. The agreement is not valid or enforceable without a signature, and dates will help to prove the moment the agreement went into effect. The agreement must be signed by both the employee and a representative of the company with the authority to bind the company in employment contracts (such as an HR representative or the President).
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