Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Compromise agreement definition

What does Compromise agreement mean? In employment practice, a compromise agreement is a written contract used by an employer and employee to settle workplace disputes—often on termination—in return for compensation and other terms, with the employee waiving specified statutory and contractual claims. In England & Wales and Scotland, the statutory term since 29 July 2013 is settlement agreement (renamed by s.23 Enterprise and Regulatory Reform Act 2013). To validly waive statutory employment claims it must: be in writing; identify the particular complaints; confirm the worker received independent legal advice from a relevant, insured adviser who is identified; and state that the statutory conditions...

UK taxation of termination payments in employment settlement agreements: components, HMRC challenges and case law, PILON/PENP, restrictive covenants, legal fees, PAYE after P45, pension rights pitfalls, and tax indemnities

Published by a LexisNexis Tax expert

Practice notes

Where a employee may have prospective claims against the employer under the Employment Rights Act 1996 (ERA 1996) or other employment legislation, or might otherwise pursue a breach of contract claim, the parties can conclude a settlement agreement to terminate the employment on the terms specified in that document (although, on a limited number of occasions under employment law, certain claims cannot be compromised by a settlement agreement). Senior managers/shareholders can likewise execute settlement agreements if they depart when the employing business is sold. For a model settlement agreement (with drafting notes), see Precedents: Settlement agreement (employment) or Settlement agreement (employment) (short form). By agreeing a settlement, the employer gains assurance that the employee will not bring a future claim against the employer. Among other matters, the settlement agreement will address all sums and benefits due, or agreed, to be paid to the employee, and will record the terms on which employment is brought to an end...

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Sam Whitaker

Debevoise & Plimpton LLP

Sam is an International Counsel in the London office of Debevoise & Plimpton LLP. He provides the full range of employment and benefits advice on transactions and stand-alone employment matters. He has substantial experience of advising on the employment and benefits aspects of various transactions, including UK listings, share and asset acquisitions and disposals (both UK-based and multi-jurisdictional transactions), joint ventures and other transactions. He provides the full range of stand-alone employment advice including the implementation of employment and benefit arrangements for senior executives, implementing executive severance arrangements, managing UK and international redundancy exercises and related consultation requirements, the establishment of share incentive and bonus plans, employment litigation involving restrictive covenants, unfair and wrongful dismissal and discrimination issues. He also advises on compliance with regulatory requirements on remuneration, in particular the FCA/PRA’s Remuneration Codes and, at a European level, CRDV....

Web page updated on 21/05/2026

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