Compromise / Settlement Agreements
We specialise in advising employees on the terms and effect of a Compromise Agreement or Settlement Agreement.
What is a Compromise Agreement?
It is possible for a contract of employment to be brought to an end by mutual agreement between the employer and the employee. By entering into this agreement, the employee normally agrees to give up his or her right to bring any form of legal action against their employer in return for a payment. Compromise agreements can be worded in many different ways but they usually contain a number of standard sections:
Outstanding Salary & Holiday Pay
The compromise agreement will specify the termination date, and will provide for the employee to be paid all outstanding holiday pay up until the date of termination. This payment will be subject to tax and national insurance.
Ex Gracia Payment
It will normally specify the payment the employee is to receive in compensation for loss the loss of employment. This payment is often referred to an ex gracia payment. This payment is tax free up to £30,000.
Whilst the ex gracia payment is paid tax free, the employee is normally required to indemnify the employer in respect of any tax that may be payable as a result of the employees individual tax arrangements.
Waiver of Claims
In return for the ex gracia payment, the employer will require that the employee signs away any right to bring a claim against their employer.
Normally employers will require the employee to acknowledge that they are to maintain the confidentiality of information which the employee has come into contact with during their employment.
Why do you need a Solicitor?
This type of compromise agreement will usually require the employee to take legal advice on the terms and effect of the agreement. A solicitor will give you the advice that you need on whether or not it is providing you with the right protection and also whether or not the compensation that you are offered is sufficient based on various aspects of your employment including length of service, salary and reasons for termination. It is a requirement that it is signed by a solicitor or other legal professional, to confirm that you have been given advice.
How much will a compromise agreement cost?
Usually they contain a provision that the employer will pay the employee’s reasonable legal fees. This means that you will not be liable for any costs and you employer will pay us directly.
How long does it take to complete?
Once the compromise agreement has been signed by all the parties involved, then the payment will usually be made either within 7 – 14 days or on the next pay date.
If you are unhappy about the terms?
If you are unhappy with the terms of the agreement then there is no obligation for you to sign it. It may be possible to negotiate the terms. However if you are still unhappy then you may be able to bring a claim against your employer. We would be very happy to consider you case and offer to represent you on a no win no fee basis.
Call us now
Please call us now if you require representation and you want discuss your options, please call us on 0800 014 8727 (Mon – Fri 9am to 5.30pm) or alternatively, fill out the simple form opposite and we will call you back at a time convenient to you.
The Government has recently announced a change in the law which will come into play in shortly. The main change is in the name to ‘settlement agreement’, however there are other changes which will effect these types of agreements. To find out more click here.