Partner Compensation Agreement Template

This Partner Compensation Agreement ("Agreement") is made as of [Date] by and among the partners of [Law Firm Name], a [State] [LLP/PC] ("Firm").

1. Compensation Structure

• Outline base compensation components: fixed draw, percentage of collections, discretionary bonus.
• Define formula or metrics used to allocate profits (billable hours, origination, client management, firm contributions).
• Describe tiers or classes of partners (equity, non-equity) and associated rights.

2. Profit Pool Allocation

• Establish annual budget and profit pool after expenses and reserves.
• Specify percentages allocated to base draws, origination credits, working attorney credits, management contributions.
• Provide schedule for distributions (monthly draws, quarterly true-ups, annual settlement).

3. Origination and Matter Credits

• Define origination credit policy, including sharing when multiple partners involved.
• Outline procedures for transferring credits, handling inherited or institutional clients.

4. Performance Metrics and Review

• Metrics evaluated annually: billable hours, realization, collections, business development, leadership, pro bono.
• Compensation committee or executive committee responsible for reviewing and approving adjustments.
• Timeline for submission of partner self-evaluations and business plans.

5. Adjustments and Clawbacks

• Procedures for adjusting draws based on performance or firm needs.
• Clawback provisions for uncollected receivables or write-offs.

6. Capital Contributions

• Requirements for initial capital, additional contributions, and return of capital upon withdrawal.
• Interest on capital accounts and capital call procedures.

7. Benefits and Perquisites

• Outline health, retirement, malpractice insurance, expense reimbursements.
• Policy on firm-paid CLE, memberships, travel.

8. Leaves of Absence

• Treatment of compensation during medical, parental, or sabbatical leaves.
• Impact on origination and profit distributions.

9. Dispute Resolution

• Process for resolving compensation disagreements (mediation, arbitration).

10. Term and Amendments

• Agreement effective for fiscal year [Year]; subject to annual review.
• Amendments require approval of [percentage] of equity partners.

11. Confidentiality

• Partners agree to maintain confidentiality of compensation data.

12. Withdrawal and Retirement

• Notice requirements for withdrawal or retirement.
• Treatment of capital accounts, pending matters, origination credits, tail liability.

Signatures

Partner: ____ Date: __

Partner: ____ Date: __

Managing Partner (on behalf of Firm): ____ Date: __

Attach compensation policy handbook, formulas, and examples illustrating distribution calculations.