Factors You Need to Consider for a Reasonable Settlement Agreement

When an employer offers you a settlement agreement, you’ll no doubt have concerns regarding financial terms, such as whether the amount is negotiable and whether accepting it would be a mistake or a sensible decision. 

A fair settlement is based on what you’re entitled to under your contract, the circumstances under which your employment is ending, and whether you’d have grounds to make a claim. This article will go through a few concepts you need to understand before forming a settlement agreement.

An Average Compensation Agreement Payout

There is no average settlement amount, as the amount you get relies heavily on the circumstances of each case. However, the situations where you get higher offers are if you have:

• Worked for your employer for more than two years
• Your employer has been forcing you to resign
• Have solid evidence to show you’ve been mistreated (constructive or unfair dismissal claim)

If you are involved in whistleblowing or discrimination, you can receive higher payouts. In those situations, the usual two-year service requirement doesn’t apply, giving employees much stronger leverage in negotiations. If you’re unsure about an offer and want guidance on negotiating, McCann Settlement Agreements can help review your options and ensure you get a fair settlement.

Standard Payments to Expect for a Reasonable Settlement Agreement

Certain payments you can expect to receive under a settlement agreement are:

1. Contractual and Statutory Payments

When you leave a job, a settlement agreement usually covers everything you’re owed up to your last day. That includes your salary and benefits, along with any notice pay, whether you serve it, get paid in lieu, or are placed on garden leave.

Additionally, you should also be compensated for any holiday you haven’t used, and any bonuses or commissions you’ve earned but have not yet received. Sometimes, your employer may ask you to agree to restrictions on future work, such as a non-compete clause, and in those cases, it’s common for them to offer additional compensation to balance that limitation.

2. Compensation Payments

A big part of most settlement agreements is the compensation payment, sometimes called a termination or ex gratia payment. This is basically money for leaving your job. For instance, in the UK, you can often get up to £30,000 of this payment tax-free. The amount you get depends on some factors like your role, seniority, and the type of claims you can make.

Compensation to Expect from an Employment Tribunal Claim

An employment tribunal is a UK court responsible for dealing with issues, such as unfair dismissal, between employees and employers. When a case goes to a tribunal, the main goal of compensation is to put you back in the position you would have been in if you hadn’t lost your job.

For example, if your pay is £2,000 a month and you expect to be unemployed for six months, basic compensation might be around £12,000. In cases involving discrimination or harassment, you might get additional payments for “injury to feelings” depending on the severity of the situation.

Endnote

If you’re dealing with a settlement agreement, it’s normal to wonder what you’re entitled to and whether the offer is fair. Understanding the types of compensation payments, how they are calculated, and the factors that can affect their amounts will help you make better decisions and feel more confident during negotiations.