I have been offered a Compromise Agreement
Are you leaving your job?
Has your employer asked you to sign an agreement?
You are not alone – Compromise Agreements are used a lot by employers in helping to resolve disputes at work and they can be great in helping the parties to move on.
We can advise on whether you have been offered a “reasonable deal” and what steps you could take to negotiate better terms. If appropriate we can step in and deal with the negotiation process for you.
We are experienced employment law solicitors and have a good track record in negotiating settlements for employees.
What is a compromise agreement?
This is a legal agreement under which you agree not to pursue any employment related claims against your employer usually in exchange for a financial payment. There are certain formalities that must be met in order for the agreement to be legally binding and to provide the protection from claims that employers seek. One of these is that the employee must be advised by a qualified employment solicitor as to the “terms and effect of the agreement” on the employee’s ability to pursue employment claims (usually that after entering into the agreement, the employee will be prevented from bringing claims).
It is therefore important that an employee has access to proper legal advice from a specialist employment solicitor as once an agreement is entered into, there is no second bite of the cherry, even if circumstances change.
What are the advantages of signing up to an agreement?
Signing up to a Compromise Agreement that has been offered to you will provide you with certain advantages that may not be available to you in the event that you decided to pursue a claim against your employer through an Employment Tribunal. These include:-
- Speed – and the option to be provided with a “clean break” from your employment and claims arising, such as discrimination or harassment. In reaching agreement with your ex employer, you will be able to walk away from your employment without having to go through the stress and expense of trying to achieve a result through the Employment Tribunal system which can be expensive, stressful and time consuming. Moving on with your life as soon as possible can be a very attractive option, particularly if you think that it will not take you much time to find new employment.
- Certainty – as you will know from the outset that you are going to be provided with a sum of money, and further, you know exactly what that sum of money is going to be and when it will be paid. Issuing a claim at the Employment Tribunal will not provide you with the same level of certainty as you are by no means guaranteed to win your case, and further, the Employment Tribunal has discretion when deciding how much money should be awarded to you in the event that your claim is successful.
- Tax advantages – your employer may be offering various sums of money to you under the terms of the compromise agreement, some of which may be able to be paid in a tax efficient way. Sums paid on termination of employment that are not chargeable to tax as employment income can potentially be paid without PAYE deductions up to a limit of £30,000.
- An agreed employment reference – this is normally available as part of the negotiation and can be very valuable in allowing you to “move on”. An employment reference will not be awarded by an Employment Tribunal.
- There may be other commercial terms such as an agreement in relation to dealing with customers and future business practices. You may wish your employer to release an agreed statement to staff in relation to your leaving. Confidentiality is also often a concern.
- An amicable parting of ways – a prolonged employment dispute will often provoke strong feelings and can damage ongoing relationships and cause unnecessary bitterness. Settlement by reaching a deal helps to avoid this.
What next?
You do not have to accept the offer to sign up to a Compromise Agreement if you do not want to, and your employer cannot force you to sign it. If you are unable to decide whether or not to sign up to your agreement, we can discuss matters with you and help you to make up your mind.
If you are unhappy with the sum of money that is being offered to you, we can step in and contact your employer or their solicitors . We have found that our own involvement in negotiations significantly increases the possibility of employers making an increased offer.
If you do wish to sign up to the Compromise Agreement that has been offered to you, you will need to instruct an employment law solicitor as soon as possible to provide you with the advice that you are legally required to obtain prior to signing up. Your employer will normally contribute towards your legal costs in obtaining legal advice on the terms and effect of the agreement although this can be limited.
Disclaimer – The contents of this page are provided for general guidance only and do not replace the need to obtain legal advice about any given situation.
