HR tip: Compromise agreement

2nd Aug 2007
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These questions are being answered by Learn HR, a market leader in the provision of HR and payroll training and nationally-recognised professional qualifications.

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.

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By KarenBee
02nd Aug 2007 10:51

Has anyone got a 'sample' Compromise Agreement that I could look at please?

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By charlosp
06th Aug 2007 16:58

Hi just to add the note that a Cot 3 form may be used just as effectively to compromise with an employee but this may only be used if ACAS have been involved in the negotiations.

You can find a compromise template on my website under 'precedents' but you need to take legal advice to use one.

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