We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Business

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Compromise Agreement?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 5,577
Share

A compromise agreement is a type of legally binding document that outlines the types of compensation an employee receives at the time his or her employment is terminated. The use of this type of agreement is common in nations that provide the opportunity for employee tribunals in the event that an employer chooses to let an employee go for any purpose. Typically, the terms of the agreement are negotiated between the employer and the former employee and help to minimize the chances that the employee will later seek further compensation by filing some type of wrongful termination suit.

In nations like the United Kingdom, the compromise agreement is formally recognized by government statute as a legitimate means of establishing a legal settlement without the need to hold some sort of tribunal. It is not unusual for both parties to retain legal counsel to negotiate terms that are ultimately acceptable to everyone concerned. Depending on the circumstances, the preparation and acceptance of the compromise agreement can take place in a matter of days or require an extended length of time before both parties are satisfied and willing to commit to the contract.

The use of the compromise agreement may occur in a number of situations. One common example is voluntary redundancy, in which an employee willingly agrees to end his or her working relationship with the employer, usually due to economic cutbacks on the part of the employer. In this scenario, the agreement is used to define the provisions for a severance package, including any lump sum payment on the front end, any stock issues that are awarded to the outgoing employee, and any other financial provisions that may be relevant to individual situations.

Laws regarding the content of a compromise agreement will vary from one country to another. Some may also restate specifics regarding the former employee’s use of proprietary information for a defined time frame after the severance takes place. Should the terms of the employment termination require that stock shares be repurchased by the employer, the content may include provisions that govern the rate per share that is paid as part of the repurchase. Since the text of the compromise agreement can differ from one setting to the next, obtaining the services of a legal professional to aid in both the negotiations and the approval of the finished document is imperative, if both parties are to protect their interests and arrive at a mutually beneficial conclusion.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-compromise-agreement.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.