Compensation

[Bjorn]

I'm curious as to a good method to divide up the amount of revenue an employee brings into the firm.

In the past I've heard 1/3 to employee 1/3 to owner and 1/3 for expenses.

What are some formulas that work well?

Mahalo.

Bjron

[JohnH]

Depends on whose ox is being gored

If I'm the employee, I'm thinking 2/3 to the employee and 1/3 split between the owner and expenses.

If I'm the owner, I'm thinking 2/3 to the owner and paying the employee what's left of the other 1/3 after paying expenses.

[erchess]

One Major Point

is ""Who is generating the business?" If the employee is serving clients generated by the owner but which the owner cannot or does not wish to serve, that is one thing. If the employee is a rain maker that is another thing. In the latter case it is also important to have in a contract the question of whether if the employee leaves your employment he or she may seek to retain the clients he or she brought you. Obviously if the employee is generating clients who he or she cannot serve for three years after leaving you, then the employee is probably in a position to demand most of the revenue from these clients while he or she is with you. Frankly if the employee is a rain maker why not provide a way for him to eventually progress from employee to a co owner of the the firm?