Ending your employment on agreed terms may bring mixed feelings. The process may seem strange and confusing. QualitySolicitors is here to help you through the legal maze - so you are free to make a clean break and move on with your life...

What is a compromise agreement?

This is a legal agreement that brings to an end any claims you might have arising out of your employment or its termination. In effect you receive compensation for potential claims you could bring against your employer, for instance for unfair dismissal [link] or discrimination.

The advantage of a compromise agreement is that it gives certainty to both parties. Your employer can be sure that you will not bring claims against the company. You can be sure of receiving a certain amount of compensation, within a certain period.

Why do I need a lawyer?

As an employee you must seek specialist independent legal advice before signing the compromise agreement. It is a legal requirement that you get professional advice on the terms and effect of the agreement. Your adviser must sign the compromise agreement to confirm that advice has been given.

Your solicitor should advise you on any potential claims that you are compromising so that you fully understand the legal issues and can make an informed decision. You will need to have some idea of whether you are being paid adequate compensation for the claims you may be compromising.

The advice can only be given by certain people including a qualified lawyer, who must hold an appropriate certificate of indemnity insurance.

Will I need to pay for this?

In most cases your employer will pay a contribution towards legal costs. This is likely to mean that you may not have to pay anything personally if you are happy to sign the agreement.

If you require extensive amendments or negotiations, you may need to contribute towards legal costs. Generally this is well worth while, for the benefits that your lawyer can obtain. For example, you may want us to negotiate the compensation being offered, or to agree the wording of a reference to future employers.

Is the compensation tax-free?

Generally the first £30,000 of compensation for comprising your claims canl be paid without deductions for income tax and national insurance.

Contractual payment such as wages and accrued holiday will be subject to tax and national insurance as normal. Other payments such as payment in lieu of notice may not be taxable, depending on what your contract of employment says.