October 20, 2010
A large percentage of employers are reporting an increase in the use of compromise agreements, according to new research.
One-third of employers said that their use of compromise agreements had increased over the past few years, while 16% said it had decreased, a study by XpertHR has found.
A compromise agreement is a formal, legally binding agreement made between an employer and employee in which the worker agrees not to pursue particular claims in relation to their employment, usually in return for a financial settlement.
According to the research, 80% of companies use compromise agreements to protect their organisations against legal claims from ex-employees.
Half (52%) of the employers who use compromise agreements for departing employees said that they helped reduce the number of tribunal claims made against them as a result.
"They protect the employer from spurious claims and at the same time allow the employee to leave with a sense of dignity and an attractive pay-off," commented Charlotte Wolf, author of the research.
"However, if they are used too frequently, departing employees will learn to expect the financial rewards associated with them."
Companies considering offering compromise agreements should seek legal advice before introducing them to employees.
