Compromise Agreement Template for England and Wales

A Compromise Agreement is a legally binding contract that allows you and your employer to resolve employment disputes or agree terms for ending your employment relationship. Under England and Wales law, this document provides certainty for both parties by preventing future employment tribunal claims in exchange for agreed compensation and settlement terms.

When do you need this document?

You'll need a Compromise Agreement when facing workplace disputes, redundancy situations, or mutual agreement to end employment. Common scenarios include performance-related dismissals, discrimination claims, whistleblowing cases, or restructuring where employers want to avoid tribunal proceedings. The agreement is also essential when negotiating enhanced redundancy packages or resolving grievances without formal disciplinary action. Many employers proactively use these agreements during organisational changes to ensure clean departures and protect confidential information.

Key legal considerations

Several critical elements must be addressed in your Compromise Agreement. Settlement payments require careful structuring to maximise tax efficiency, with statutory redundancy payments typically tax-free up to £30,000. Confidentiality clauses must be reasonable and not prevent you from whistleblowing or reporting criminal activity. Reference provisions should specify what information your employer will provide to future employers. Post-employment restrictions, such as non-compete clauses, must be proportionate and necessary to protect legitimate business interests. The agreement should also address accrued holiday pay, pension contributions, and any ongoing benefits.

Legal requirements in England and Wales

Under the Employment Rights Act 1996, your Compromise Agreement must satisfy specific statutory conditions to be legally enforceable. You must receive independent legal advice from a qualified adviser, such as a solicitor or barrister, who has professional indemnity insurance. The agreement must identify the specific claims being settled and clearly state that statutory settlement requirements have been met. Your legal adviser must sign a certificate confirming they've explained the agreement's terms and effect. The document must be in writing and cannot prevent you from pursuing certain protected claims, including personal injury claims that haven't yet arisen. ACAS involvement may be required in some circumstances, particularly where discrimination claims are involved.