What Are Compromise Agreements?

Given the ongoing impact of Covid-19 it is no surprise that organisations are having to reassess their operations and in many cases are being forced to make changes to their business models. This may include closing offices or stores, relocating and, sadly, in some cases making staff redundant.

When a company needs to end an employment relationship it may look to do this by seeking a suitable way forward with an employee, often using a type of contract known as a compromise agreement or settlement agreement.

A compromise agreement is a legally binding contract. Under its terms an employee waives the right to pursue any claim or grievance they may have against the employer, in return for which they may receive a compensatory sum (eg in some cases an enhanced redundancy payment). Not all compromise agreements provide for a compensation payment – sometimes an employer may waive its right to take certain action against an employee.