Compromise agreements are used by employers to record severance arrangements with departing employees.

The main feature of a compromise agreement is that it waives an individual's right to make a claim in the employment tribunal or court. From 29 July 2013 "compromise agreements" or "compromise contracts" in relevant legislation have now become "settlement agreements". The Government believes the new wording better reflects the reality of such agreements.

Also from 29 July a settlement agreement may be proposed by an employer before any other formal procedure, such as a disciplinary process, has been initiated. Where a valid settlement agreement is concluded, an employee will be unable to bring an employment tribunal claim about any matter specified in the agreement. However, where a settlement agreement is not agreed, an employee may still bring a claim.