Compromise agreement

Is a compromise agreement the same as a settlement agreement?

Yes. "Compromise agreement" is the name the same document carried until 29 July 2013, when section 23 of the Enterprise and Regulatory Reform Act 2013 renamed it a settlement agreement. An older compromise agreement you signed before that date is still valid, and the independent-advice requirement that made it binding has not changed.

What did the 2013 package change?

The rename was not cosmetic on its own; it arrived alongside two other changes commonly called the 2013 package. First, section 111A of the Employment Rights Act 1996 introduced "pre-termination negotiations": an employer can now open settlement talks before any dismissal has happened, and, subject to limited exceptions such as automatic unfair dismissal and discrimination, those talks are inadmissible in a later unfair dismissal claim even without an existing dispute. Before 2013, without-prejudice protection normally required an existing dispute to attach to.

Second, Acas published its Code of Practice on Settlement Agreements, giving employers and employees shared guidance for the first time, including its suggestion that 10 calendar days is a reasonable period to consider an offer and take advice. That is guidance, not a strict legal minimum, but tribunals look at it when weighing whether an employer's conduct was fair.

What did not change?

The conditions that make the agreement legally binding are exactly the same as they were under the old name. Under section 203(3) of the Employment Rights Act 1996, the agreement must be in writing, relate to the particular claim being waived, and the employee must have received advice from a relevant independent adviser who is identified in the agreement and covered by professional indemnity insurance. The 2013 rename did not touch any of that. It also did not change the tax treatment of a termination payment, which is governed separately by sections 401 to 403 of the Income Tax (Earnings and Pensions) Act 2003.

I have an old compromise agreement: is it still binding?

Yes, if it met the statutory conditions in force when you signed it. A compromise agreement signed before 29 July 2013 waives the claims it lists just as effectively as a modern settlement agreement does; the rename did not unwind or reopen anything already agreed. What can matter now is what the agreement actually covers: older wording sometimes lists claims more narrowly than a current template, so if a dispute arises later, it is worth having a solicitor check exactly what was, and was not, waived.

What to do if you have been offered one now

Treat it exactly like a settlement agreement, because that is what it is. Read our full guide to what a settlement agreement is for the six statutory conditions in full, and what to do first once you have one in hand. You can get an indicative figure from the settlement agreement calculator, and speak to a solicitor through our settlement agreement solicitors hub when you are ready for advice on the document itself.