Settlement Agreement Offer Checker: Is Your Offer Fair?

Key Points

What Should You Expect in a Settlement Agreement?

The first question most people ask when they receive a settlement agreement is whether the amount being offered is reasonable. It is a fair question, but the answer is not straightforward. There is no official “going rate” for settlement agreements, and no two situations are identical. What you should receive depends on your salary, length of service, the reason for the settlement, and the strength of any underlying employment claims.

That said, there are patterns. Employment solicitors who handle settlement agreements regularly can tell you within a few minutes whether an offer is in the right ballpark. Our free offer checker helps you do the same assessment yourself as a starting point.

Your minimum entitlements come first

Before looking at the compensation element, check that your settlement agreement includes the payments you are already legally entitled to. These are not part of the “deal”; they are owed to you regardless.

Notice pay is the most important. Under section 86 of the Employment Rights Act 1996, you are entitled to a minimum of one week’s notice for each complete year of service, up to a maximum of 12 weeks. If your contract provides for a longer notice period, the contractual period applies. This should be paid as salary (with tax and National Insurance deducted) whether you work the notice period or receive payment in lieu.

Statutory redundancy pay applies if you are being made redundant and have at least two years’ continuous service. It is calculated using a formula based on your age, length of service, and weekly pay (capped at £719 per week for 2025/26). The maximum statutory redundancy payment is currently £21,570. You can check your entitlement with our redundancy calculator.

Accrued holiday pay covers any holiday you have earned but not taken up to your termination date. Your employer must pay this as part of your final settlement.

Typical Settlement Agreement Ranges

The compensation element of a settlement agreement (often called an ex-gratia payment or termination payment) is the part that is negotiable. It is paid on top of your notice pay, holiday pay, and any redundancy entitlement. The value depends primarily on why you are leaving and the strength of any potential employment claims.

These ranges are based on general patterns observed across settlement negotiations in the UK. They are not guarantees or predictions. The right figure for your situation depends on the specific facts of your case.

Redundancy (straightforward, fair process)

If you are being made genuinely redundant and your employer has followed a fair consultation process, compensation typically falls between one and three months’ gross salary on top of notice and statutory redundancy. The lower end is more common where the redundancy is genuine and the process has been properly followed. If there are procedural concerns, for example a lack of meaningful consultation or unfair selection criteria, the figure moves towards the higher end.

Performance management or capability

Employers sometimes offer a settlement as an alternative to continuing a performance improvement plan (PIP). Compensation in these situations typically falls between one and three months’ gross salary. From the employer’s perspective, a settlement can be cheaper and faster than continuing a formal process. From your perspective, the strength of any argument that the performance management was unfair or a pretext for something else is what determines your negotiating position.

Workplace disputes and grievances

If you have raised a grievance or there is an active workplace dispute, typical compensation ranges from two to four months’ gross salary. Employers often prefer to settle rather than investigate a grievance, particularly if it raises sensitive issues or involves senior managers. The stronger your grievance and the more uncomfortable the investigation would be for the employer, the more they tend to be willing to pay.

Discrimination or harassment

Discrimination and harassment claims under the Equality Act 2010 are uncapped at tribunal. This means there is no statutory limit on what a tribunal can award. Compensation typically includes a financial losses element plus an injury to feelings award assessed using the Vento bands.

For claims presented on or after 6 April 2025, the Vento bands are: lower band £1,200 to £12,100 for less serious cases, middle band £12,100 to £36,400 for serious cases, and upper band £36,400 to £60,700 for the most serious cases. Exceptional cases can exceed the upper band.

Settlement compensation in discrimination cases typically ranges from three to six months’ gross salary or more, depending on the nature of the discrimination, the strength of evidence, and the potential tribunal award.

Whistleblowing

Whistleblowing claims under Part IVA of the Employment Rights Act 1996 are also uncapped at tribunal. If you have made a protected disclosure and suffered detriment or dismissal as a result, compensation typically ranges from three to six months’ gross salary or more. Strong whistleblowing cases with clear evidence can settle for significantly higher amounts.

Mutual agreement (no underlying dispute)

Where both sides have genuinely agreed it is not working and there is no underlying claim, compensation is typically lower: one to two months’ gross salary. Your bargaining position is weaker because the employer does not face significant legal risk. That said, employers still value a clean exit and will usually offer something rather than nothing.

Factors That Affect Your Settlement Value

The ranges above are starting points. Several factors can push your settlement value up or down from the typical range.

Factors that strengthen your position

You have submitted a grievance. Employers often increase offers to avoid the time, cost, and discomfort of investigating a formal grievance. This is particularly true where the grievance involves senior managers or sensitive allegations.

You have started Acas early conciliation. Contacting Acas (the Advisory, Conciliation and Arbitration Service) to begin early conciliation signals that you are serious about pursuing a tribunal claim. Employers take notice.

You have issued a tribunal claim. Filing an ET1 claim form significantly increases your employer’s motivation to settle. The cost of defending a tribunal claim, both in legal fees and management time, often exceeds the cost of a reasonable settlement.

You are on sick leave, particularly if work-related. If your absence is caused by your employer’s conduct, this strengthens any potential claim and extends the period of financial losses you could recover at tribunal.

You have evidence of discrimination or whistleblowing. These claims are uncapped at tribunal. Even if the primary reason for the settlement is something else, underlying discrimination or whistleblowing concerns increase your employer’s risk exposure considerably.

Factors that weaken your position

You have less than two years’ service. Without two years’ continuous employment, you cannot bring an ordinary unfair dismissal claim. This removes one of the most common sources of leverage. However, discrimination and whistleblowing claims do not require any minimum service period, so if those issues are present, your position may still be strong.

You have already been dismissed or resigned. Once you have left the business, your employer has less incentive to pay for a clean exit. They have already achieved the separation. Your remaining leverage depends on the strength of any claims you could still bring.

You have already found a new job. A tribunal award for unfair dismissal is primarily based on financial losses between jobs. If you are already earning at the same level, your losses are minimal and your employer knows this.

“The most common mistake I see is people accepting the first offer without understanding what they are giving up. A settlement agreement is a legal contract where you waive your right to bring tribunal claims. The compensation should reflect the value of those claims, not just what seems like a nice round number.”

Tom Street Principal Solicitor, Tom Street & Co.

What to Check in Your Settlement Offer

Beyond the headline compensation figure, several elements of a settlement agreement can significantly affect the overall value and your protection after signing.

Notice pay should be included and correctly calculated. Check whether your employer is paying your contractual notice (or statutory notice if longer). If you are receiving payment in lieu of notice, confirm the amount matches your basic salary for the correct number of weeks. Under section 86 of the ERA 1996, statutory notice is one week per year of service up to a maximum of 12 weeks.

Holiday pay should be included. You are entitled to payment for any accrued but untaken holiday up to your termination date.

Statutory redundancy should be included if applicable. If you are being made redundant with two or more years’ service, statutory redundancy pay should appear in the agreement on top of any ex-gratia payment. It should not be bundled into the compensation figure without being separately identified.

Your employer should contribute to legal fees. While there is no legal obligation, it is standard practice. The typical contribution is £350 to £500 plus VAT. If your agreement does not include a legal fees contribution, that is unusual and worth raising.

An agreed reference should be included. Ask for a reference to be attached to the agreement as a schedule. This prevents your employer from providing a negative or inconsistent reference to future employers.

You should have at least 10 calendar days to consider the offer. The Acas Code of Practice on Settlement Agreements recommends a minimum of 10 calendar days. If you are being pressured to sign quickly, that is a red flag.

Check for restrictive covenants. Some settlement agreements introduce new non-compete or non-solicitation clauses that were not in your original employment contract. If new restrictions are being added, you should be compensated for agreeing to them.

Unfair Dismissal Compensation: The Benchmark

When assessing whether a settlement offer is fair, it helps to understand what a tribunal might award if you pursued a claim instead. For unfair dismissal, compensation has two main components.

The basic award uses the same formula as statutory redundancy pay: 0.5 weeks’ pay per year under 22, one week’s pay per year between 22 and 40, and 1.5 weeks’ pay per year over 41. Weekly pay is capped at £719 for 2025/26, giving a maximum basic award of £21,570.

The compensatory award covers actual financial losses: loss of earnings until you find equivalent work, loss of pension, loss of benefits, and loss of statutory rights (typically £350 to £500). For 2025/26, the compensatory award is capped at the lower of £118,223 or 52 weeks’ gross pay. This cap does not apply to discrimination or whistleblowing claims.

Our unfair dismissal compensation calculator can estimate what a tribunal might award. You can also use the schedule of loss calculator to build a more detailed picture including loss of earnings over time.

What to Do Next

Our offer checker gives you a starting point for understanding whether the compensation you have been offered is in the right range for your situation. But it cannot assess the strength of your individual legal position, and that is ultimately what determines the value.

If the checker suggests your offer may be low, or if your situation involves discrimination, whistleblowing, or other complex factors, getting a specialist solicitor to review the agreement is the logical next step. Your employer is legally required to pay for independent legal advice before you sign, so this does not cost you anything.

A solicitor reviewing your agreement will assess whether the compensation reflects the value of the claims you are waiving, check that all your contractual entitlements are correctly calculated, review the clauses for anything unusual or unfair, and advise on whether negotiation is likely to achieve a better outcome.

Once you know the compensation is right, use our settlement agreement tax calculator to see what you will actually take home after tax.