Settlement Agreements (or Compromise Agreements)

“Settlement Agreements” used to be called “Compromise Agreements”.  They are the same thing: a formal written agreement in which an employee agrees, usually in return for payment, to waive claims he or she may have against the employer.

It can be rather more complicated than that, but that is the basic bargain.  The question always for each side is: if we can’t reach an agreement, what is the strength and potential value of any claim that may then be decided a Court or Employment Tribunal?  The considerations aren’t just monetary.


We also like to keep our approach commercial.  That means, while ensuring there is no prospect of ongoing claims or dispute, we generally avoid drafting agreements which are completely one-sided in their terms.  That kind of drafting drafts nearly always lead to demands for amendment and negotiation, simply increasing time and costs for everyone and protracting the settlement process.  Instead, we draft sensibly, putting our efforts into ensuring the employee, and their adviser, can see the sense of accepting the offer on the table and in reaching a reasonably speedy resolution.


For employees similarly, we do not encourage hair-splitting negotiation over the drafting of small points which in practice are going to make no difference to anyone’s position.  If it is immediately obvious from our instructions that an offer is a good one and unlikely to be improved upon, we will say so and will often restrict our fees to the level of contribution provided for by the employer in the agreement.

On the other hand, we will not advise an employee to sign an agreement before we are satisfied it is in their interest to do so.  If that means more time and cost is involved in investigating the merits and worth of any potential claims, we will discuss and agree sensible limits for that investigation so that fees are always kept in perspective and proportionate to sums and issues at stake.

Very often, we will advise an employee against signing the agreement put to them but will negotiate a significant improvement to the offer.  Occasionally, especially where pension funds have a significant bearing, an employee is best served by deploying tactics to remain in employment and frustrate the desired dismissal.

Pragmatic and Expert

Whomever we are advising, our commercial and pragmatic approach means we don’t just look at the money in the offer. We ensure our clients make informed decisions having regard to wider issues, of which there can be many:

–  the potential merits and value of claims that may be compromised

–  the financial and hidden costs of not reaching an agreement

–  the costs and saving of tax and national insurance for the employee and employer

–  the appropriateness of tax indemnities

–  the perceived and actual value of an agreed reference

–  preserving post-termination restrictions

–  the value and effectiveness of confidentiality, gagging and mutual respect clauses

–  claims against the employee that might be overlooked

If you are in a situation where Settlement Agreement is being considered, give us a call.