Compromise agreements or settlement agreements as they are to be commonly know as soon, compromise a claim an employee/worker may have against their employer in return for compensation. Commonly they will bring about the termination of employment but not in every case.
For employers, they need to ensure that the agreement is legally binding on the employee. A template is a good place to start but it needs to be tailored to the individual circumstances to compromise the specific claims the employee has. Just including a generic list of every employment claim known to man will not normally result in a binding agreement if thought has not been given to the actual claims the employee may have. The employer may also want to consider how to pitch the offer as many solicitors the employee may see will normally ask for more. The employer may also want to think ahead about what will happen if a deal cannot be struck and having a plan B.
For the employer a compromise can be a swift and clean way of exiting an employee but it is not normally the cheapest option and you will also need to budget for paying a contribution to legal fees. It does however allow the business to move on quickly and recruit a replacement if required in a lot shorter timescale.
For the employee, you need to take advice on the agreement since this is a legal requirement and it is standard practice for the employer to pay at least a contribution towards this legal advice. First step is to find an adviser, a solicitor is a good place to start but pick a solicitor with knowledge in the area of employment law and ideally a specialist. I can recall on one hand, out of 100’s of agreements, the times I have signed the initial draft with a client, the agreement is written by the employer or its solicitor and your solicitor should be looking after your interest. Even if I am not negotiating with the employer in 99% of cases there is wording that needs to be amended within the agreement.
A compromise agreement or settlement agreement is normally in full and final settlement of all claims so you need to ensure the sum on offer adequately compensates you according to your particular circumstances. Sometimes there are tax savings to be had or extras not included such as an agreed reference. Many agreements contain an entire agreement clause meaning anything that has been agreed needs to be in the agreement if you want it honoured.
Don’t forget there is life after a compromise and whilst change is not always welcome, sometimes being forced into something, can work out for the better as you end up doing something you would never have taken that risk and voluntarily left to do!
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