Compromise or Termination Agreements are a type of agreement between you and your employer which reflects the terms of the compensation package offered to you on the termination of your employment, or to avoid going to Tribunal or Court in the case of a dispute at work.
Compromise Agreements do not have to be offered or accepted upon termination or dismissal, but companies often produce them to allow the parties to draw a line under the working relationship. The effect of entering the agreement is that you will not be able to issue or pursue a claim you may have against your employer in respect of breach of your employment rights, or termination of your employment.
If you are given a compromise agreement by your employer, you will be asked to see a solicitor or legal advisor to sign off the agreement. This is because these types of agreements involve you agreeing not to issue a claim against your employer for breach of your employment rights, including for example, discrimination, unfair dismissal, and failure to consult properly in a redundancy. In return for you “compromising” your claim and rights, you receive an enhanced payment, usually called an ex gratia or compensation payment to compensate you for losing your employment, and which is received tax free up to a limit of £30,000.00.
The agreement will probably set out the reason for termination, payment details for compensation and holiday pay, the claims that you may have and are waiving, particular clauses about taxation of the compensation payment, confidentiality of the agreement, and the consequences of breaching the agreement, in some detail.
Compromise, or “Termination” agreements may well be produced on an “off the record” basis during a dispute, or at the request of an employee looking for a way out of dispute and employment. If so, seeking advice and assistance with negotiations may well be in your interests.
What will it cost you?
Given that you are “compromising” claims that you may have against their employer, Compromise Agreements must comply with particular regulatory requirements, and must be certified by a solicitor or relevant legal advisor.
It is therefore usual practice for employers to contribute towards the legal costs of the employee seeing an advisor to be advised as to the terms and effect of entering the agreement.
Contributions will range from £250 to £500 plus VAT. For particularly complicated terminations or involving high earning individuals, shares or Director’s service contracts, contributions may be higher.
What we need from you:
For further information or a free initial appraisal of your requirements, please call Sarah Evans, Head of Employment, on 0161 236 0662, or email.