Settlement agreement calculator: how much should your offer be?

Search for a settlement agreement calculator and you will find plenty of tools promising a number in sixty seconds. Treat them with caution: there is no official formula, and any calculator that ignores your claims, your contract and your leverage is guessing. Here is how a specialist solicitor actually values an offer - so you can sanity-check yours.

Start with the contractual floor

Whatever your legal claims, the agreement must at least cover what you are already entitled to:

• Notice pay - contractual notice or the statutory minimum (a week per year of service, up to 12 weeks), whichever is longer
• Accrued, untaken holiday
• Contractual extras - bonus or commission earned, pension contributions, benefits through the notice period

If the offer does not cover this floor, it is not really an offer at all. Everything above the floor is the ex gratia payment, and that is the negotiable part.

Then benchmark against a tribunal claim

The ex gratia figure is priced against what you might win if you refused to sign and claimed instead. For unfair dismissal, that is the basic award (the same formula as statutory redundancy pay) plus a compensatory award for your actual losses, capped at the lower of £123,543 or 52 weeks' gross pay. Discrimination and whistleblowing claims are uncapped and add injury-to-feelings awards, which is why agreements in those cases settle higher.

A practical benchmark many specialists use: what would three to six months of job-search losses look like for you, adjusted for how strong your claim is? Weak claim, quick re-employment, low figure. Strong claim, senior role, specialist market - the number climbs fast.

The tax shape matters as much as the headline

The first £30,000 of a genuine termination payment can be paid free of tax and National Insurance. Notice pay, holiday pay, bonus and payments for restrictive covenants are always taxable. Two offers with the same headline can leave you thousands of pounds apart once the structure is applied, so the split between taxable and ex gratia elements is one of the first things your solicitor will check.

Where the extra value usually hides

• An agreed reference and announcement wording - often worth more to your next role than another £1,000
• Restrictive covenants narrowed or removed, or a payment for keeping them
• Bonus, commission, shares and options preserved where you would otherwise forfeit them
• Outplacement support, legal fee contribution and sometimes continuation of benefits

What is a realistic uplift?

Employers expect a counter, and first offers usually carry headroom. Where claims are weak and the process was fair, movement might be modest. Where the dismissal is rushed, the selection looks rigged or discrimination is in the background, packages regularly move by months of salary. The honest answer to "how much should I get" is: the contractual floor, plus the discounted value of the claims you are waiving, plus whatever your solicitor can negotiate on the terms.

You should also be given a reasonable time to consider the offer - ACAS guidance says at least 10 calendar days - and your employer will normally contribute towards your legal fees because the agreement is not binding without independent advice. Our guide to settlement agreement solicitor costs explains who pays what, and what to do when you are offered a settlement agreement covers the first 48 hours. When you are ready, our settlement agreement solicitors page explains how the matching works.