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What is a Compromise Agreement?
A Compromise Agreement is a document agreed and signed between an employee and employer either before termination of the employment contract or after termination of an employment contract.
The reason an Employer may want to use a Compromise Agreement is to ensure that they can terminate the employment contract/dismiss the employee and ensure there will be no claim made against them by the Employee.
The Employee may want to sign the Compromise Agreement to set out the terms they require as a result of their contract being terminated and no longer working for the Employer.
What would a Compromise Agreement include?
A Compromise Agreement would include:
- All payments due to the Employee
- Confirmation as to Tax – usually payments up to £30,000.00 can be paid without deduction
- Confirmation that an employee can not bring a claim against the Employer
- Sometimes restrictive covenants e.g. an employee cant set up the same business down the road, approach staff, make any disparaging comments about the Employer
- Sometimes a reference will be agreed for the Employee’s benefit in finding a new job
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How much does a Compromise Agreement cost?
The Employer will usually be required to pay for the Compromise Agreement and the legal advice offered by the Solicitor.
This is agreed with the Employer so that the Employee does not have to pay a penny.
What are the benefits of a Compromise Agreement?
It ensures certainty.
The Employer is secure in knowing they will not be subjected to a claim and can draw a line under the situation.
The Employee can receive their payment/compensation sooner than had they issued a claim and can ensure they receive a reference without the delay that accompanies bringing a claim.
Why do I need a Solicitor?
It is a legal requirement that you use a solicitor for independent legal advice regarding a Compromise Agreement.
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