Properly compensating employees is a perpetual issue for fund managers, as they must allocate management fee and performance compensation pools, balancing business and tax considerations while incentivizing and retaining key employees. A recent program sponsored by the New York Alternative Investment Roundtable provided a primer on how private fund managers can use management fee streams and performance fees to incentivize and compensate their partners and employees in a tax-efficient manner. Timothy Frazier, vice president of TriNet, hosted the presentation, which featured Gregory Kastner, senior tax manager for Baker Tilly Virchow Krause, who presented insights from the client alert he wrote on structuring employee compensation plans. This article summarizes the portions of the presentation most relevant to private fund managers. For more on hedge fund compensation, see our two-part series on deferred compensation plans: “Structuring Plans to Retain Top Talent” (Jun. 22, 2017); and “Practical Considerations: Vesting Schedules, Deferral Amounts and Compliance With Section 409A” (Jun. 29, 2017); as well as our two-part interview with David Claypoole: “How Have Industry Developments Affected the Value of Legal and Compliance Staff?” (Feb. 2, 2017): and “Will Industry Deregulation Affect the Value of Legal and Compliance Staff?” (Feb. 16, 2017).