Compromise Agreements

Compromise Agreements are increasingly being offered by employers when making people redundant. This can apply in both large and small companies.

The purpose of these is make a speedy and efficient settlement so that both parties can move on.

A Compromise Agreement is only valid if the employee is advised by a solicitor and to ensure this happens the employer pays the costs - as an employee you do not pay us for this service!

We have answered some common questions below.

• What is a Compromise Agreement?
  • It is a legally binding agreement following the termination of your employment. Usually it covers any severance payment, notice period, payment in lieu etc.
• What is the benefit for the employee?
  • Employees get free legal advice as part of the package. You get prompt payment of any settlement and there is no need to go to a tribunal.
• What is the benefit for the Employer?
  • By accepting a Compromise Agreement the employee agrees not to pursue any claim they may have to an employment tribunal and the employer knows that there are no future liabilities.
• What does it typically cover?
  • The full breakdown of the payments you are receiving such as holiday pay, bonuses, time in lieu, pension rights etc
  • Confidentiality, both in terms of your employers trade secrets and business affairs, and also of the terms of the agreement. You may be paid an additional sum for this.
  • You will usually be required not to make any derogatory comments against your employer. This could be made mutual.
  • It may confirm any existing post-termination restrictive covenants in your existing contract of employment. For example ability to work for a competitor or your ability to service existing clients and customers in a new job.
  • A list of statutes in the compromise agreement (such as the Race Discrimination Act, Sex Discrimination Act, Employment Rights Act) and many more, under which you will agree not to bring a claim.
  • The compromise agreement is intended to be in full and final settlement of all claims.
• Are payments tax free?
  • Usually payments up to £30,000 compensation can be paid without deduction but you should speak to us about this complex issue.
• What happens if at the end of the discussion if I do not wish to sign?
  • You do not have to sign, you can take your case to an Employment Tribunal but you may end with the legal minimum, and most Compromise Agreements offer above this.
• When will I get payment?
  • Typically under 14 days but it may depend on when your employer runs the payroll.

Next step

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