Compromise Agreement Advice?

We offer fixed fees which are very competitive and can meet you immediately - read our employment section on Compromise Agreements for more details

What is a Compromise Agreement?

A 'compromise agreement' is a legally binding agreement which is considered a mutual agreement between the employer and employee. It is provided in lieu of termination of employment either by reason of redundancy, by agreement or in settlement.

It usually provides for a severance payment by the employer 'compensation sum', in return for which the employee agrees not to pursue any claim they may have at an employment tribunal. The compromise agreement will also deal with the notice element in the contract of employment and may provide for a "payment in lieu" which may be taxable if a clause exists in your contract and often an agreed reference will be attached.

Why would a Compromise Agreement be necessary?

An employer can only protect itself from an employee bringing a complaint to a tribunal after redundancy by having them sign away their right to do so in a compromise agreement. This can only really be done in a compromise agreement and has the effect of turning the redundancy package into a "full and final" settlement of any claims the employee has against the employer. Likewise if there has been any internal grievances or disciplinary an agreement can ensure a swift resolution without any come back for either the employer or the employee.

Why should you seek legal advice?

Unfortunately compromise agreements are not as simple as they sound. It is actually a legal requirement that you seek independent legal advice so you understand the terms and conditions. The compromise agreement will not otherwise be binding. Furthermore, negotiation is required to reach an agreement which satisfies both parties and a solicitor can explain to you whether the terms offer you adequate protection and make sure you are being paid a suitable amount of compensation. Since the compromise agreement will bar you from making any claims to the Employment Tribunal it is essential you know what you are agreeing to, i.e., you may have restrictions in your contract which remain in force and which may prevent you obtaining income from a nearby competitor.

How much does it cost?

The employer should pay for the employee's legal advice and its contribution will be set out in the compromise agreement itself. This firm will often fix the advice to the sum agreed by the employer or will negotiate these fees on your behalf.

If you are advised your claim is worth more than that being offered we can even offer you a no win no fee on any sums above , what you have already been offered, we achieve upon settlement. More money without the risk of costs to you (subject to terms)

What if I don't agree to the terms?

If you do not sign the compromise agreement the employer will not pay you the compensation sum. Instead you will need to raise a grievance or issue a claim. The solicitor should explore these options with you during the meeting.

If however, you simply wish to amend the clauses of the compromise agreement or negotiate a larger compensation sum this will invariably be handled by the solicitor within days of you instructing them to represent you. It maybe that this involves further work and you will be liable for these costs, but if you seek to recover further sums or reduce your termination restrictions or obtain a favorable reference then this may well be additional costs.

How long will it take to conclude matters?

We can see an employee as soon as the draft compromise agreement has been provided to them. We will spend around 30-45 minutes with you taking you through the compromise agreement and addressing any questions you have. If there are amendments required these will be sent to the employer within 24hours of the meeting. Often compromise agreements are signed and concluded the same day, but it will depend on the circumstances and the complexity of the terms to be re-negotiated

When will the compensation be paid?

Usually the sums are paid within 7 to 14 days of signing the compromise agreement. However, this can vary depending on your termination date or what has been agreed, but payment terms will be contained in the agreement. The level of compromise agreement tax deductions will be outlined in the agreement.

Is my notice pay taxable?

If you are working your notice you will be paid as normal and subject to the usual tax deductions.

If you are being paid in lieu of notice, in that you receive your notice pay, but leave early then this will depend on your employment contract.

If there is a clause in the compromise agreement permitting your employer to pay you in lieu of notice, known as a PILON clause, then all notice pay will be subject to tax. If there is no PILON clause the employer cannot force you to accept payment in lieu, but if you do accept it in some circumstances this can be paid tax free as part of the compensation sum. This is subject to a number of factors which we will discuss with you. We advise on compromise agreement tax in terms of what is paid tax free and what is not.

NEED US?

  • Book an appointment and agree a fee for this work
  • Send us your draft compromise agreement and employment contract
  • Confirm your date of birth, salary & whether you accept a compromise agreement in principle
  • We then handle the rest for you