One-third of employers said that their use of compromise agreements had increased over the past few years, while 16% said it had decreased.
This is according to a survey by XpertHR, which found that 80% of companies use compromise agreements to protect their organisations against legal claims from ex-employees.
Half (52%) of employers who used compromise agreements for departing employees said that they helped reduce the number of tribunal claims made against them.
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.
However, these are not used on a routine basis in companies taking part in the survey. On average, six were used by each organisation over the past two years and just one in five used them as a matter of course during redundancy situations.
Charlotte Wolf, author of the report, said that the legally-binding agreements can help organisations manage high-risk employment relations issues, such as the exit of senior employees, workers leaving because of ill-health and redundancies.
“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,” she commented.
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“However, if they are used too frequently, departing employees will learn to expect the financial rewards associated with them.”
Read the full findings of the XpertHR report on compromise agreements.
