Employment Settlement Agreement Calculator UK

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Settlement Agreement Calculator

Your Estimated Settlement

Total Estimated Settlement

£0.00

Detailed Explanation

How to Use This Calculator

Working out your settlement figure doesn’t have to be confusing. This calculator helps you estimate what you might receive when leaving your job through a settlement agreement. Simply enter your employment details above, and we’ll break down each component of your potential package.

What You’ll Need

  • Your current annual salary before tax
  • How long you’ve worked for your employer
  • Your current age
  • Notice period stated in your contract
  • Any unused holiday allowance
  • Outstanding bonuses or commission owed
Helpful Tip: Your contractual notice period might be longer than the statutory minimum. Check your employment contract to find the exact figure. This can significantly affect your settlement amount.

What Goes Into Your Settlement

Settlement agreements bundle together several different types of payment. Some are amounts you’re legally entitled to, whilst others depend on negotiation. Let’s break down what typically makes up your final figure.

Statutory Redundancy Pay

If you’re being made redundant and have worked for your employer for at least two years, you’re entitled to statutory redundancy pay. This is calculated using your age, length of service, and weekly pay.

Age Range Multiplier per Year Example (5 years)
18-21 years 0.5 weeks’ pay 2.5 weeks’ pay
22-40 years 1 week’s pay 5 weeks’ pay
41+ years 1.5 weeks’ pay 7.5 weeks’ pay
Remember: Weekly pay is capped at £719 from April 2025, and only 20 years of service count. The maximum statutory redundancy payment is £21,570.

Notice Pay

You’re entitled to payment for your notice period even if your employer doesn’t require you to work it. Your contract might specify a longer notice period than the statutory minimum, which increases from one week after one month’s service to 12 weeks after 12 years.

Holiday Pay

Any unused annual leave must be paid out when your employment ends. This is calculated based on your daily rate multiplied by the number of days you haven’t taken.

Ex-Gratia Payment

This is the negotiable part of your settlement. Employers typically offer this in exchange for you agreeing not to bring claims against them. The amount varies widely depending on your circumstances, the strength of any potential claims, and how much the employer wants to avoid tribunal proceedings.

Your Position Strength Typical Ex-Gratia Range
Limited or no claims 1-2 months’ salary
Moderate potential claims 2-4 months’ salary
Strong evidence of wrongdoing 4-6 months’ salary
Very strong discrimination/whistleblowing 6-12+ months’ salary

Taxation Explained

Not all settlement payments are taxed the same way. Some portions are tax-free, whilst others are treated as regular income.

Tax-Free Components

The first £30,000 of ex-gratia (compensation) payment is completely tax-free. This exemption applies to genuine compensation for loss of employment, not to contractual entitlements you’ve already earned.

Taxable Components

These are subject to income tax and National Insurance as if they were regular salary:

  • Notice pay or payment in lieu of notice
  • Outstanding salary
  • Holiday pay for accrued leave
  • Bonus and commission payments
  • Any ex-gratia amount above £30,000
Tax Planning: If your settlement includes both taxable and tax-free elements, the agreement should clearly specify which portions fall into each category. Your employer will use an OT tax code for amounts over £30,000.

Frequently Asked Questions

Can I negotiate the settlement amount offered?
Absolutely. The ex-gratia portion is almost always negotiable. Your employer’s first offer is typically their opening position, not their final one. If you have strong potential claims or significant evidence of poor treatment, you’re in a better position to negotiate upwards.
What happens if I don’t sign the settlement agreement?
You’re not obliged to sign anything. If you reject the offer, your employer might withdraw it and potentially proceed with dismissal through their normal procedures, or they might come back with a revised offer. Consider your options carefully and seek independent legal advice.
Do I need a solicitor to review the agreement?
Yes, legally you must receive independent legal advice before signing a settlement agreement for it to be valid. Your employer typically contributes £200-£500 towards these legal fees, though you can choose your own solicitor and pay any difference.
How long do I have to consider the offer?
There’s no set legal timeframe, but employers usually give you 7-14 days to consider and seek advice. If you need more time, you can request it. Don’t feel pressured to sign immediately.
Will signing affect my benefits or future employment?
Settlement agreements don’t directly affect your entitlement to benefits like Universal Credit or Jobseeker’s Allowance, though the payment itself might be taken into account. They also shouldn’t prevent you from working elsewhere, unless there’s a specific restrictive covenant in your contract.
What if my employer hasn’t paid my pension contributions?
Outstanding pension contributions should be included in your settlement. Check your payslips and pension statements to verify all contributions have been made. These are separate from the settlement sum and are amounts already owed to you.
Can I claim more if I find another job quickly?
Settlement agreements are final once signed. Even if your circumstances change afterwards, you can’t go back and request more money. That’s why it’s crucial to get the figure right before signing.

Avoiding Common Mistakes

Many people leave money on the table or agree to unfavourable terms simply because they don’t know what to look out for. Here are the pitfalls to avoid.

Not Counting All Your Holiday

Don’t forget that you continue to accrue holiday during your notice period, even if you’re not working it. Make sure the calculation includes holiday earned right up to your leaving date.

Accepting the First Offer

Employers expect negotiation. Their initial offer leaves room for movement. If you have any potential claims or if the offer seems low compared to industry standards, push back professionally.

Ignoring Future Losses

If you’re likely to be out of work for several months, or if you’re in a senior role where jobs are scarce, your settlement should reflect these future losses. Don’t just think about immediate entitlements.

Signing Without Legal Advice

Besides being a legal requirement, independent advice helps you spot problems with restrictive covenants, pension clauses, or reference provisions that could harm your future prospects.

Forgetting About Benefits

If you had private medical insurance, a company car, or other perks, their value should factor into negotiations, especially if you won’t have them during your notice period.

Critical Point: Settlement agreements typically include confidentiality clauses. Make sure you understand what you can and cannot discuss before signing, as breaching these terms can result in having to repay the settlement.

When Might You Receive More?

Certain circumstances significantly increase settlement values beyond the standard formula. If any of these apply to you, your agreement should reflect the additional risk your employer faces.

Discrimination Claims

Claims involving discrimination (age, disability, race, sex, religion, etc.) have no compensation cap at tribunal. Employers often pay substantially more to settle these claims because the potential liability is unlimited.

Whistleblowing

If you’ve raised concerns about wrongdoing and faced detriment as a result, whistleblowing claims also have no upper limit. These cases attract significant settlements when the evidence is strong.

Long Service at Senior Level

Senior employees with many years’ service often receive enhanced packages. If you’re in a niche role or senior position, finding equivalent employment might take 6-12 months, justifying a larger settlement.

Constructive Dismissal Evidence

If your employer has breached your contract so seriously that you had no choice but to resign, and you have evidence documenting this, you’re in a strong negotiating position.

The Settlement Process Timeline

Understanding what happens when helps you plan and prepare appropriately.

Initial Offer

Your employer presents a draft settlement agreement, usually with a covering letter explaining the situation. This might happen during a meeting or be sent to you directly.

Legal Advice Period

You have time to take the agreement to a solicitor. They’ll review the terms, explain what you’re giving up, and advise whether the offer is reasonable. This typically takes 3-7 days.

Negotiation Phase

If the offer is too low or the terms aren’t acceptable, your solicitor will usually negotiate on your behalf. This might involve one or several rounds of back-and-forth.

Finalisation

Once you’re happy with the terms, you sign the agreement. Your solicitor signs separately to confirm they’ve advised you. The agreement becomes legally binding at this point.

Payment

Most agreements specify payment within 14-28 days of your leaving date or of signing, whichever is later. Make sure the payment terms are clearly stated.

References

  • GOV.UK. Calculate your statutory redundancy pay. Available at: https://www.gov.uk/calculate-your-redundancy-pay
  • Employment Rights Act 1996. Chapter 18. London: The Stationery Office.
  • HM Revenue & Customs. Tax on termination payments. Available at: https://www.gov.uk/tax-termination-payments
  • Acas. Redundancy: your rights. Available at: https://www.acas.org.uk/redundancy
  • The Employment Rights (Increase of Limits) Order 2025. Statutory Instrument 2025 No. 124.
  • Income Tax (Earnings and Pensions) Act 2003. Section 401-416. London: The Stationery Office.

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