Compromise Agreement

Agreements that terminate an employment relationship are often called Compromise Agreements or Settlement Agreements. Such an agreement is a way of terminating an employment relationship by mutual agreement, which usually specifies an arbitral way of ending a dispute in the workplace without having to go to court.

These agreements are usually made with the proviso “Without Prejudice and Subject to Contract” which means that until the negotiations are completed and the agreement is signed, no party can refer to the fact of the negotiations and their content until all the terms of the agreement have been agreed.

Compromise agreements – what should you know

• Usually signing an agreement means the complete and final settlement of any claims between the employer and the employee without the possibility of future appeals to any legal jurisdiction;
• the agreement covers all claims, including those arising from health problems resulting from an accident at work and potential compensation;
• If the employer is to pay a cash equivalent (wage) for unused annual leave, this must be included in the agreement. The same applies to all other financial matters (unpaid wages, bonuses, overtime, notice period, etc.) and non-financially matters, e.g. providing references in writing – their content and who is to confirm them if the new employer contacts them;
• Before signing an agreement, it is important to determine which of the payments will be subject to tax and PRSI and USC contributions and how much. Irish tax law gives tax exemptions for certain amounts covered by agreements, depending on the length of service;
• The agreement should specify the employee’s rights to pension benefits provided by the pension fund (PRSA accounts).