Compromise agreements: the old name for a settlement agreement

If the document in front of you says “compromise agreement”, it is the same kind of document as a settlement agreement. The name changed in Great Britain on 29 July 2013; the rules for making one bind did not. In Northern Ireland the old name is still the legal one.

Is a compromise agreement the same as a settlement agreement?

Yes, in England, Wales and Scotland. The change was made by one section of the Enterprise and Regulatory Reform Act 2013, and it did exactly one thing: it swapped a word.

The commencement note on the amended section 203 dates the change to 29 July 2013, under S.I. 2013/1648, art. 2(c). Nothing in section 23 alters the conditions an agreement must meet, the people who can advise on it, or the claims it can settle. It replaced “compromise” with “settlement” wherever the word appeared in the provisions it lists.

So an employment lawyer who advertises “compromise agreements” is advising on the document that the Employment Rights Act now calls a settlement agreement. People still search for the old word, more than a decade after it left the statute book in Great Britain, which is why it survives in advertising. Settlement agreement, COT3 and severance compared.

If your agreement was signed before July 2013

Section 23 amends the wording of statutes from its commencement date. It contains no transitional provision about agreements already signed, and none was needed: it did not change what a valid agreement had to contain. A compromise agreement made in, say, 2010 was tested against conditions that read the same as today’s, apart from the one word.

That does not mean an old agreement covers everything. Condition (b) requires the agreement to relate to “the particular proceedings”, and what it actually settled is a question of what it says. If you are trying to work out whether something you signed years ago stops a claim now — a pension point, a later discrimination issue, an unpaid sum that came to light afterwards — the answer is in the list of claims and the waiver clause, not in the title.

If a new document still says “compromise”

Condition (f) is the one place where the word matters in practice. In Great Britain the agreement must “state that the conditions regulating settlement agreements under this Act are satisfied”. A template drafted before 2013 says “compromise agreements” in that clause. This page does not say that an outdated word is fatal; no primary source we have read decides it either way. It does say that asking for the clause to quote the current statute costs nothing, and that the request is easy for the employer’s side to accept. The clauses, one by one.

The six conditions, then and now

These are the conditions in section 203(3) of the Employment Rights Act 1996 in their current form. Read “compromise” for “settlement” in (f) and you have the pre-2013 text.

Two of them are about the adviser, and they are the reason a settlement or compromise agreement cannot be signed off by the employee alone. The adviser has to be independent of the employer and insured for the advice:

Whether your employer pays towards that advice is a term of the agreement, not a statutory entitlement, and it is negotiated like any other term. How the advice is paid for.

Northern Ireland: still a compromise agreement

The Employment Rights Act 1996 does not extend to Northern Ireland, and the 2013 rename amended that Act, not the Northern Ireland Order. So in Northern Ireland the document is still a compromise agreement, made under Article 245 of the Employment Rights (Northern Ireland) Order 1996, and its statement of compliance refers to the conditions “regulating compromise agreements under this Order”.

Parliament spelled the split out in one UK-wide Act. The National Minimum Wage Act 1998 applies in Northern Ireland as well as Great Britain, so section 23 had to add a subsection keeping the old word there:

Employers with staff on both sides of the Irish Sea

This is where the two names cause real work. An employer using one template for a Belfast employee and a Glasgow employee needs two different statements of compliance — one under Article 245, one under section 203 — and two different tribunals named in the advice: an industrial tribunal and an employment tribunal. Early conciliation runs through the Labour Relations Agency in Northern Ireland and through Acas in Great Britain. If your agreement names the wrong regime for where you work, raise it with your adviser. Compromise agreements in Northern Ireland, in full.

A compromise agreement calculator, worked once

The arithmetic is the same under either name. What changes between Great Britain and Northern Ireland is the cap on a week’s pay for statutory redundancy: £751 in Great Britain from April 2026, £783 in Northern Ireland under SR 2026/57. The table takes one person — aged 45, 10 complete years, £770 a week gross — with a £25,000 ex gratia sum agreed on top.

The £19 a week between the two caps comes to £228 over 12 weeks. Everything else is identical: Article 118 of the Northern Ireland Order sets the same minimum notice as section 86 — a week per complete year from two years, up to twelve. The £30,000 threshold is in sections 401 and 403 of the Income Tax (Earnings and Pensions) Act 2003, which apply across the UK, and notice pay is taxed as earnings under either name. A Scottish taxpayer pays Scottish rates on the taxable slice. How the threshold works.

What the calculator cannot tell you

The statutory figures are a floor, not a valuation. What a settlement or compromise agreement is actually worth depends on the claim you would be giving up — how strong it is and what a tribunal could award — and on how long it would take to replace your pay. That is the part an adviser prices, and it is the same in Belfast as in Birmingham. Run your own figures · how to negotiate.

Common questions