Compromise Agreement

A legal agreement used to compromise particular complaints an employee has in relation to his employment or its termination and ensure a “clean break” for both employer and employee. Normally the employee will receive a lump sum payment (often structured in a tax efficient manner) and an agreed reference in return for signing a Compromise Agreement.

To be enforceable, Compromise Agreements must comply with strict requirements as set out in s.203 Employment Rights Act 1996 and various equivalent statutory provisions in other Acts and Regulations. For example, the agreement must be in writing and the employee must receive independent legal advice (normally paid for at least in part by the employer). (Note this is not a complete list of the legal requirements, which are outside the scope of this resource).

If you are an employer and need a Compromise Agreement drafting try our Compromise Agreement Wizard - it will enable you to draft a Compromise Agreement instantly and at a fraction of the cost of instructing a solicitor to do it for you.