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This type of agreement (originally introduced in 1996 and previously called Compromise Agreements), are designed to facilitate an employer and an employee reaching an appropriate financial arrangement for the termination of the employee’s employment.


The form of agreement can be used to deal with any situation in which the employee’s employment is coming to an end. From unfair or constructive dismissal through to ill health, retirement or redundancy. The process will normally be commenced by a discussion or meeting between the employer and employee. The terms may be suggested by the employer and a draft written agreement given to the employee.

What happens next?

The employee will make an appointment with a nominated solicitor (or authorised trade union adviser). The role of the solicitor or other authorised adviser is to advise whether the employee has any legal rights which they can assert against the employer and what those may be worth in the context of the financial offer which may be on the table. The employee must be prepared to tell the full story and background relating to the proposed termination of employment. The adviser may recommend:

(a)    that there are grounds on which to try and renegotiate the termination package;

(b)   that the financial terms are acceptable, but that there will need to be other alterations to the agreement for instance to safeguard interests under a pension or share scheme; or

(c)    may approve the agreement as drafted.

Legal effect

This process is the only legally binding procedure by which an employee can sign their rights away to pursue a claim against their former employers through the Employment Tribunal. Any other method will not be legally binding.

The adviser will sign a certificate at the end of the agreement confirming that the appropriate advice has been given to the employee with regard to their rights regarding pursuing any claim through a Tribunal.

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