Solicitors in Birmingham

Why should I pay my employee any more than he/she is contractually entitled to ?

Of course, every situation is different but if there is a possibility that an employee may bring a claim against your business in the Employment Tribunal, you will then face paying legal costs to defend yourself with little prospect of a costs order against the former employee even if you successfully defend the claim. This is obviously a very annoying position but as a pure business decision, it can make sense, in the right circumstances, to terminate by consent, which also provides certainty for you as employer against the threat of the vast majority of any further claims by that employee.

I have a disruptive employee in the workplace – is a compromise agreement worthwhile in this situation ?

Again, every situation is different but one factor certainly worth bearing in mind is staff morale. A disruptive employee can cause real damage to any business and some employees are good at “playing the game”. they will be aware that short of an act of gross misconduct, it could take the employer a number of months to wait and go through the time, trouble and expense of going though various disciplinary stages such as first warning, written warning, final warning before dismissing and even then the employee may still start a Tribunal claim. A compromise agreement is certainly worth considering in these circumstances.

If I give a few employees a compromise agreement and ex-gratia payment they’ll all want one ?

Many employers worry about the possibility that employees generally will believe that if colleagues have received a compromise agreement, they should get one too, notwithstanding  a very different situation. This is of course a genuine concern. It can be allayed to a degree by the fact that compromise agreements will generally include a clause requiring the employee to keep the fact of it and it’s terms strictly confidential and that a breach will require repayment.

However, sometimes there are leaks and employees are now generally quite familiar with the existence of compromise agreements, which have been around for some years now. We recommend that the best approach is simply to be consistent. Don’t start giving compromise agreements to all staff or even a good proportion. Be firm and consistent in your approach.

I heard that there are some other advantages to compromise agreements for employers ?

Compromise agreements can be particularly useful for employers with employees on long term sickness absence, where the absence is extended and prognosis uncertain. However, it is very important to tread very carefully in this type of situation and we would recommend taking early and ongoing advice. In addition, it is possible to include in a  compromise agreement a forward looking set of restrictive covenants, such as non-competition, non-poaching. with anyone in a senior or sales capacity, these restrictive covenants can be very important. If the employee will agree to have such clauses incorporated, you will probably have to pay an additional sum, generally £500.00 or less as legal consideration for a forward applying contractual covenent by the ex-employee.

Finally, the big advantage of a compromise agreement is that, in the right circumstances it is of real benefit in that, for a cost effective amount, you get certainty regarding an end to issues with difficult employment law problems and risks with an employee. It is currently the only way of obtaining such certainty.

Why should we pay the employee’s legal costs and what will the cost be for drafting a compromise agreement ?

It is standard practice for the employer to pay the employee’s legal costs, of generally around £300.00 plus VAT. This is because the legislation creating compromise agreements requires the employee to have received independent legal advice, some, but few, employers refuse to pay the employee’s costs. In terms of your own costs, compromise agreements are largely standardised in order to comply with statute. In terms of a pure drafting exercise, and not including any other advice regarding the underlying reasonj for offering the agreement or negotiations or other employment law work, the cost for drafting an agreement should rarely exceed 2-3 hours work maximum, so this is cost effective.