Your Questions Answered

Is a Compromise Agreement binding?

Yes! Once you enter into a Compromise Agreement there is no backing out. The agreement constitutes a full and final settlement of all claims between the parties. It cannot be revoked and it cannot be set aside. It is because the Compromise Agreement is legally binding that the law requires the employee to take independent specialist advice.

Do any formalities have to be followed?

For a Compromise Agreement to be binding, there are a number of legal formalities that must be followed. These formalities include a requirement that the employee obtains independent, professional advice from a specialist who has adequate professional indemnity insurance.

What should the Compromise Agreement set out?

Compromise Agreements should be in writing and set out all the terms of the settlement that the parties have reached. This may include:-

  • Details of severance payments or compensation to be made;
  • The tax treatment of those payments;
  • The date by which payment must be made;
  • Confidentiality issues;
  • Restrictive covenants;
  • References.