Compromise Agreements

What is a compromise agreement?

It is legally binding contract between an employee and employer. Typically, the employee agrees to waive all rights to bring employment claims, such as unfair dismissal, discrimination or breach of contract, in return for a payment of money and/or other benefits. Compromise agreements are commonly referred to as severance agreements or termination agreements.

Some initial considerations

  • How much money is offered and what does it represent? eg notice pay, compensation, bonus.
  • Will payment be deferred or made in instalments?
  • Any other benefits offered? eg post termination use of the company car, transfer of mobile, laptop, mobile number, continued medical cover etc
  • How much tax will you pay? Can any of the settlement be paid free of tax or paid into a pension fund?
  • Do post termination restrictions impact on your ability to obtain other work?
  • Do you have other job offers?
  • Will your employer agree a positive job reference?
  • Do you wish to agree an announcement to staff, trade connections or the market generally?
  • How much will the employer contribute to your legal costs?
  • Will your employer offer ouplacement support?
  • What sort of warranties are you being asked to give?
  • What happens to your shares/share options/SAYE/bonus entitlement?
  • Is directors and officers liability insurance cover necessary?

Why do I need legal advice?

If you are offered a compromise agreement, you will need independent legal advice.

The law requires employees to take independent legal advice on the terms of any compromise agreement. An employer is very unlikely to offer any termination package until the employee is able to confirm that they have taken such advice.

Why Averta?

Compromise agreements at at the centre of our business. Our employment solicitors have handled a vast number of compromise agreements, from those which are straightforward to the most complex and valuable. We have acted for nearly 3,000 individuals since 2004, of whom a significant number have signed compromise agreements with their employers.

Our lawyers have credibility and experience of having worked in large commercial law firms and are well known in the legal market.

We can:

  • Analyse and advise you on possible claims you may have against your employer and the value of those claims
  • Explain the meaning and effect of the compromise agreement on your rights to pursue those claims
  • Negotiate with your employers or their lawyers
  • Advise you on other related matters, such as restrictive covenants, share options, LTIPs and bonus payments etc.
  • Agree a strategy that will maximise the overall value of the termination package

Costs

Costs vary from a few hundreds of pounds to many thousands of pounds depending on the value of the agreement and the complexity of the situation.

Employers almost always make some contribution to an employee's costs and may pay all of those costs, in which case there may be nothing for our client to pay. However, in many cases the employer's contribution will not cover all of the costs and our client will have to pay the balance of costs over and above the employer's contribution.

Some clients worry about the level of contribution made by their employer, particularly if an employer puts an arbitrary limit on their contribution which doesn't reflect the actual costs. However, it is important to see costs in the context of the value of the overall package. Some employers may refuse to increase their contribution but may be more willing to negotiate about the level of the compensation payment.

Our aim is to help you maximise the overall value of the financial package and other benefits in your favour.

If you are not sure, just call us on 0870 421 1952 and talk to one of our employment lawyers about our costs.
 
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