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Question:"What exactly is a compromise agreement?"
HR Tip: A compromise agreement is a legally binding agreement between an employer and an employee, made usually - though not necessarily - on termination of the latter's employment by the former.
It sets out the terms of the termination and precludes the employee from taking further legal steps in connection with the topics stated in the agreement, for example unfair dismissal or unlawful discrimination.
The agreement must be set out in writing, must specify all the topics on which the employee is precluded from taking legal action, and must make clear that the employee has been made aware of his or her rights by an independent solicitor. Commonly the employer drafts the agreement having agreed a sum of money, but sends the employee off to find a solicitor with an additional sum to cover the solicitor's costs. Compromise agreements should be drafted by someone who understands employment law.