Agreeing termination payments

Agreeing termination payments with employees has is pitfalls…whilst on the face of it employers may believe that making a seemingly favourable financial offer to their employees…above contractual entitlement will see an end to a possible claim…life is not that easy. Compromise Agreements are the only means by which an employer can be certain of extinguishing an employees’ right to sue in respect of any employment claims when the employee leaves. An invention of the 1996 employment Rights Act (“the Act”), Compromise Agreements were introduced because previously either the employee had to sue and the claim was settled through the ACAS conciliation system or complicated arrangements had to be entered into to ensure the employee was paid only after the time period for bringing a claim had expired.

Why are the agreements necessary?

S.203 of the Act prohibits contracting out of the Act and makes provision in an agreement void if it purports to exclude or limit the operation of any provision of the Act of seeks to preclude an employee from bringing any proceedings under before an Employment Tribunal. The only exception to this rule is the use of a Compromise Agreement.