Compromise Agreement
What is a Compromise Agreement ?
A compromise agreement is a by consent form of contract, based largely on statute, which sets out a full and final settlement between employer and employee to terminate an employment contract. Compromise agreements secure a ‘clean break’ for both employer and employee providing a practical and effective solution to a variety of situations.
Why Use a Compromise Agreement?
If you are in a situation where you need to dismiss an employee, it is worth considering terminating the employment using a Compromise Agreement, since otherwise it can take many months to otherwise correctly terminate an employment contract and/or the costs (generally irrecoverable) of defending an Employment Tribunal claim may make it commercially sensible to usea compromise agreement.
Compromise Agreements are a useful tool to provide protection against employment tribunal claims being brought against you in the future. If you are considering terminating the employment of one or more of your employees, you may wish to consider offering a compromise agreement. We can guide you through the process to ensure that you are protected from employment tribunal claims against you.
Benefits of Compromise Agreements
- Avoids costs and risks of tribunal proceedings
- Sets out terms agreeable to both employer and employee
- Employee has the certainly of a settlement sum
- Employer is protected against employment claims.
It is customary for an employer to pay the legal costs incurred by the employee, but only if the employee enters into the compromise agreements and the employer will generally limit costs to a specific amount, typically around £250.00-£350.00 plus VAT.