If you've come across the term "compromise agreement" — perhaps from a colleague, an internet search, or an employer using older paperwork — you may be wondering whether it's the same thing as a settlement agreement. In short: yes, it is.
Key takeaways
What you need to know
- "Compromise agreement" and "settlement agreement" refer to the same type of legally binding contract.
- The terminology changed to "settlement agreement" in 2013.
- The legal requirements — including independent advice — are the same regardless of which term is used.
- You may still come across the older term in some documents, articles, or from employers who haven't updated their paperwork.
- If you're offered a document labelled a "compromise agreement", the same rights and protections will likely apply as they would under a settlement agreement.
Why did the name change?
Agreements settling employment disputes were historically known as "compromise agreements". The terminology changed to "settlement agreement" in 2013. Despite the change in name, the core legal mechanism stayed the same: a payment is typically made in exchange for you agreeing to waive certain employment claims against your employer.
"The name changed, but the substance didn't. If you're offered a 'compromise agreement', you're likely being offered exactly the same protections as a settlement agreement."
Does it matter which term is used?
No. Whether your employer calls it a "settlement agreement" or a "compromise agreement", the same legal protections and requirements should apply. This includes the requirement that you receive independent advice before the agreement becomes binding, and that you're given a reasonable opportunity to consider the terms before deciding whether to sign.
Being offered a document labelled a "compromise agreement" isn't a sign that anything unusual is happening — it most likely reflects an older template, or an employer or adviser who simply hasn't updated their terminology.
Why you might still see the older term
Some employers may still be working from older HR templates that were never updated. Older articles, forum posts, and even some solicitors who trained before 2013 may also use the term out of habit. If you come across it, you can treat "compromise agreement" as interchangeable with "settlement agreement" for practical purposes — the terms describe exactly the same document. Our glossary of settlement agreement terms covers the other language you're likely to come across.
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