How much should I ask for in a settlement agreement?
When faced with the end of an employment relationship, a Settlement Agreement can offer clarity, closure, and financial support. However, one of the most frequently asked – and crucial – questions is: How much should I ask for? At Solidaire Solicitors, we advise employees and employers alike on negotiating fair terms. Here’s a practical breakdown to help you understand what’s reasonable, and what’s possible.
Understanding a Settlement Agreement
A settlement agreement is a legally binding document between employer and employee that outlines the terms under which employment ends. In exchange for waiving the right to bring future legal claims, the employee typically receives a financial package.
1. Know Your Legal Position
Before discussing figures, you need to understand:
- Why is the agreement being offered? Is it redundancy, performance issues, or a potential dispute?
- Do you have grounds for legal claims? For example, unfair dismissal, discrimination, or breach of contract can strengthen your negotiating power.
At Solidaire Solicitors, we often begin by assessing whether the employee has leverage. The stronger your potential claim, the more compensation you can justifiably ask for.
2. Start with Statutory Entitlements
These are your minimum legal rights:
- Notice pay (or payment in lieu of notice)
- Accrued holiday pay
- Redundancy pay (if applicable)
These form the baseline of any agreement.
3. Assess the Compensation Range
Beyond statutory entitlements, compensation varies depending on circumstances. Ask yourself:
- How long would it take to find a new job?
- Have you suffered financial or emotional harm?
- Is your reputation affected?
Typical settlement packages can range from 1 to 6 months’ gross salary, but higher sums (up to 12 months or more) can be achieved where the employee has a strong legal claim or there are risks the employer wishes to avoid.
4. Other Factors to Consider
- Bonuses or commissions owed
- Equity or shares
- Tax efficiency – e.g., the first £30,000 of ex gratia compensation may be tax-free
- Agreed reference and non-derogatory clauses
- Outplacement support or training
At Solidaire Solicitors, we always ensure that no stone is left unturned during negotiations.
5. Negotiation Tips
- Don’t accept the first offer. Employers often leave room to move.
- Be prepared to justify your number. Reference industry standards, personal impact, and legal risk.
- Get legal advice. Settlement agreements must be reviewed by an independent solicitor to be legally valid – we ensure you're not signing away your rights for less than you deserve.
Final Thoughts
A settlement agreement is more than just a financial deal – it’s a way to move on with dignity and security. If you're unsure what to ask for, don’t guess. Get expert advice. At Solidaire Solicitors, we’re dedicated to securing fair, tailored outcomes for every client.