Teams can earn Compensatory picks in the draft based on departing free agents. Free Agents are ranked by the Elias Sports Bureau based on their previous two years of playing, and against players of similar positions. The top 20% of free agents are considered 'Type A' free agents, and the following 20% are 'Type B' free agents. Type A free agents will get their former team a supplemental round pick between the first and second rounds, and a compensatory pick from the signing team. Type B free agents get their former team just a supplemental round pick. To earn a compensatory pick, a free agent must either be signed before the arbitration deadline in early December, or be offered arbitration by their former team but still sign with someone else.
Compensatory picks that one team gives another via this method are the highest available pick that team has. If a team owes two other teams draft picks via Type A free agents, the team whose departing player had a higher score gets the higher ranked pick. A team cannot lose picks it has earned via compensation. Also, the first 15 picks in the draft cannot be lost via compensation, so a team that is in that rank would give up their second round pick.
The order of the supplemental round between the first and second rounds is determined by inverse order of the previous year's standings. All the Type A picks are done first, and then the order resets for all the Type B compensation picks.
Teams can also earn compensation for unsigned picks from the previous year's draft. If a team doesn't sign a first or second round pick, they will get to pick at the same slot plus one the following year. For instance, if the team with the #5 pick does not sign that player, they would have the #6 pick the following year. The regular draft order would continue around those picks. For compensation for not signing a third round pick, teams would get a pick in a supplemental round between the third and fourth rounds. If a team fails to sign a player with one of these compensated picks, there is no compensation the following year.