Compromise Agreements

Our solicitors have considerable experience advising on and negotiating the terms of a compromise agreement for all levels of seniority.

Compromise agreements are a common method of bringing to an end the employment relationship and it is a record in writing of the terms of any settlement reached between you and your employer.

The effect of you signing such an agreement is that you are effectively waiving your employment rights to bring a claim against your employment in consideration of receipt of a settlement payment and any other benefits which your employer agrees to give you.

If you are offered a compromise agreement you should seek independent legal advice on the agreement as soon as possible.

Legal requirements

In order to be legally binding, compromise agreements must comply with the following requirements:

They must be in writing
They must relate to the particular complaint or particular proceedings about which there is a dispute. An employer cannot use a compromise agreement to seek to exclude all potential future claims
You must have received independent legal advice from a solicitor or other appropriately qualified advisor, as to the terms and effect of the proposed agreement
Your advisor must be identified in the agreement and must have in force a professional indemnity policy to cover the risk of giving negligent advice
The agreement must state that the above conditions relating to compromise agreements have been satisfied

What is generally contained in a Compromise Agreement?

The compromise agreement will set out the financial and other terms upon which the employment relationship is terminated and obviously varies with each individual, but it should be drafted to include/exclude in accordance with the particular circumstances in question and will typically cover such key matters as:

Amount of your settlement payment and when it is payable
Personal injury claims or claims relating to future pension entitlement are likely to be expressly excluded
What Reference (if any) you will receive from your employer
Whether you are bound to observe confidentiality regarding the fact that you have been offered a compromise agreement
Whether you must observe any other restrictions after the employment has terminated e.g restrictive covenants
You are able to receive up to £30,000 exempt from tax, provided that it is a purely compensatory sum. This will vary and can be managed in order that what you receive is tax efficient
What level of contribution to your legal fees will be met by your employer

Contact our Employment Law specialists for advice now.

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