A compromise agreement is a legally binding contract between an employer and an employee after or during termination of employment. The agreement is made to give consideration to the employee over claims made against the employer. The result is normally a financial compensation negotiated upon by the two parties involved with the agreement that the employee will make no future claims against the employer. Compromise agreements give an employee certain advantages over situations such as dismissal on unfair terms, discrimination, or redundancy payment entitlements. The agreement is a contract, so it is in writing and made in the presence and under the advisement of a lawyer who understands the full details of the situation and has the correct knowledge to institute the terms of the agreement.
Employers in and around Peterborough have found compromise agreements to be beneficial to them since they can prevent future complaints to a tribunal and save them time and effort in going through cases with individual employees for extensive periods of time. The reasons most often found for using a compromise agreement include safe removal of an employee based on poor performance level, avoidance of legal problems in redundancy cases, and removal of senior staff discreetly.
By definition, redundancy is a situation in which an employer no longer needs the duties of the employee to be filled by anyone, and the employee is let go based on lack of need. The employee is not dismissed for poor work performance or misconduct, so a compromise agreement in this situation is often quite fair and easily reached by the two parties.
Though the employer may keep all terms fair in the compromise, an employee will most likely be asked to sign the compromise agreement to make sure the employee cannot later derive claims against the employer. The contract will often have certain loopholes and employees normally do not have full knowledge of their rights under the employment laws, so having a lawyer look through the contract is very helpful before signing. The time period in which a claim to an employment tribunal should be made is within three months after termination of employment.
Employees often have worries over signing the contract. A compromise agreement is written in legal terminology and normally references certain sections or clauses of the Acts and Regulations that employees rarely understand. Employees should be most aware of the financial sum offered in the contract and any heavy obligations placed upon them by the contract. Obligations for the employee may include restriction of personal injury rights and restriction of pension.
Certain pitfalls may be found within the contract and should be negotiated by a lawyer. These include failure of the employer to provide a valid reason for redundancy, a failure to follow correct compromise agreement procedures, and failure of an employer to consult staff about redundancies.
Compromise agreements can actually be beneficial to both employer and employee. The payment is guaranteed within a certain time frame. The first amount of payment, as a compensation or redundancy payment, should be made without deductions. Employees usually have the opportunity to have a job reference included with the agreement with details pertaining to the employer's presentation of the employee. For example, after an agreement is made and written in contract and signed by both parties, an employer must give job references without any negative words against the former employee. This is extremely beneficial to employees who have left or been dismissed on negative terms and would like to preserve a good reputation in the career industry.