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Compromise Agreements

A 'compromise agreement' is an agreement which is legally binding and which follows the termination of an employee’s employment. Usually it provides for a severance payment by an employer, in return for which the employee agrees not to pursue any claim that they may have by taking it to an employment tribunal. Compromise agreements often deal with the notice element in contracts of employment and can provide for a "payment in lieu".

Employers are keen on such agreements and are increasingly using them as a mechanism for preventing possible future complaints to an employment tribunal.

Compromise agreements are recognised by statute and are the only way a claim can be legally binding without tribunal proceedings having been initiated. However, they will not be legally effective unless the employee has received advice on them from a relevant independent adviser such as a solicitor.

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