01708 757575 mbs@ker.co.uk Enterprise House, 18 Eastern Road, Romford, Essex UK, RM1 3PJ

Compromise Agreements – An Employees Guide

Employment Lawyers

Employment Lawyers

If you are unfortunate enough to have been made redundant you may be asked sign a compromise agreement with your employer. You may also be offered such an agreement if you have been dismissed (fairly or unfairly) or if you are involved in an employment dispute. We provide expert advice for employees requiring advice on compromise agreements based in Romford Upminster Hornchurch and Brentwood.

What is a Compromise Agreement?

A compromise agreement outlines the agreed terms and conditions between an employer and employee when a contract of employment is about to be terminated. These terms can include details of any payments for redundancy, unpaid wages, bonuses, pay in lieu of notice and any holiday pay entitlement.
It is a legally binding document and is used by employers to ensure the employee does not later make a claim in the Employment Tribunal. To ensure that it is understood by all parties often the employer will pay your expenses for obtaining independent legal advice on the agreement.

What If I Sign a Compromise Agreement?

The main legal implication of signing and accepting a compromise agreement is that your right to claim against your employer via an Employment Tribunal, or through a Court, is specifically excluded.
Possible Claims After Signing a Compromise Agreement
As a rule, there are only three types of claim that can still be made after a compromise agreement has been signed. These are:
  • Personal Injury – this is generally still allowed, except in certain circumstances.
  • Pension Rights – a claim for accrued pension rights.
  • Breach of Contract – if your employer breaches the terms of the Compromise Agreement.

Tax and Compensation Payments

Tax may be payable on certain elements of the payment made to you under the terms of your compromise agreement.
Redundancy payments of up to £30,000 are usually tax free, whether contractual or statutory. Continued benefits (for example the extended use of a company car) are also generally tax free.
Payments in lieu of notice may also be tax free, so long as the employer does not make such payments as a matter of course in redundancy cases. This is also on the understanding that they do not have a contractual right to provide pay instead your notice.
In most cases, tax and national insurance would be payable on any holiday pay and wages.


Any reference that your employer does provide should be accurate, correct and a fair representation. If it is not, they could be found guilty of misrepresentation. However there is not any legal obligation for an employer to provide a reference. It may be advisable to have a reference included as part of the compromise agreement.

Fees and Payment

Although you are our client and primarily responsible for our fees normally we recover the full amount of any fees from your employer.
We would normally expect them to detail the amount they are prepared to pay for fees at the beginning of the matter. If we feel that the fee is insufficient we will negotiate a higher fee as part of your package.

How We Can Help You

Our employment lawyer will consider the terms and conditions detailed in your compromise agreement. He will then provide you with advice and contact your employer or their solicitors to negotiate any amendments if necessary. If the agreement is acceptable and all parties are happy with the wording, we will arrange for it to be signed by all parties.

Where are you located

We are located near Romford station.

Your Next Steps

For further advice from our expert employment team, please call or email Fred Rylah on 01708 757575 or email : fred.rylah@ker.co.uk

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