A compromise agreement is a legal document which is an offer made by an employer to an employee to mutually terminate the employment relationship.
Wellers has a team of solicitors highly experienced assisting and advising clients on employment termination and redundancy arrangements often called compromise agreements.
The employer may agree to mutually terminate the employment relationship on the basis of proposals set out in the compromise. The employer will generally suggest these to be non-negotiable. There is likely to be an agreement to pay salary, pension, health benefits and owed holiday pay to a certain date, part or all of the contractual notice period and often an ex gratia payment (which can be tax free currently up to a maximum of £30,000.00). There may also be a form of reference stating required factual information.
To be legally binding the employee must have received independent legal advice, generally paid for or contributed to by the employer. Issues that frequently need to be addressed include:
- Obtaining a more fulsome reference in a competitive market place
- Ensuring the payments to be made are, so far as lawful and proper, tax free
- Protecting the employee between the date of signature of the compromise and the date of actual termination of the employment – these dates may differ substantially
- Ensuring the manner and time of payment
- Clarifying that the employee’s post-termination obligations will not affect their future employment
- Checking accrued pension entitlements and the continued vesting of share options
For further information or advice please contact our employment law teams: Bromley Office 0208 464 4242 or London Office 0207 242 7265 or email employmentlaw@wellerslawgroup.com
