Solicitors Sheffield

Compromise Agreements for employers in Sheffield

A ‘compromise agreement’ is a legal tool usful for employers to end an employee and employer relationship when trust and confidence has broken down between the parties and the employer wants to settle any potential disputes in a binding way without recourse to the employment tribunals.

It usually involves making a severance payment to the employee in return for the employee agreeing not to pursue any claims they may have in an employment tribunal against the employer. This agreement can also be used to avoid claims which the employer may want to pre-empt such as redundancy claims.

It is worth noting that compromise agreements cannot bar the employee from making a claim against the employer for holiday pay or accrued pay. Also, the employer is unable to use a compromise agreement to contract out of pension rights or any personal injury claims.

For compromise agreements to become binding the employee must seek legal advice from an independent solicitor on the nature of the agreement. The solicitor must give advice and sign and certify the agreement confirming advice has been given. Compromise agreements are used to prevent tribunal proceedings being initiated by the employee and thus help to reduce litigation costs for both parties. It is generally usual practice for employers pay a contribution of around £300 to the employee’s legal costs.

Payments made to the employee under the compromise agreement (apart from any element for pay in lieu of notice and contractual rights) up to £30,000 can be paid tax free.

We provide employer clients with rapid, pragmatic advice to ensure  the most advantageous outcome.

Below are some of the key clauses and issues you need to consider in any compromise agreement.

Key Clauses in Compromise Agreements:-

• The monies that will be paid to the employee to settle any potential claims and when this will be paid
• The main provisions listing  potential claims the employee is giving up
• Terms relating to the breach of the Agreement – if the employee starts proceedings or breaks the terms of the agreement then the ex gratia payment should be returned.
• Confidentiality clauses preventing either party revealing the terms of the agreement and any potential matters which have arisen under it.
• Provision of Reference – as an employer may be reluctant to provide the employee a reference it is normal for employees to seek to negotiate a reference as part of a compromise agreement.
• Return of employer’s property clauses which states that the employee must return all laptops, mobiles phones and confidential information and data of the employer.