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When an employee raises an issue with their employer, a settlement is often the desired outcome. Depending on your situation and needs, an employer may offer you different types or values of compensation. An employer will most likely offer you what they believe is the minimum amount you will accept, which may be done following their liaising with a professional solicitor. Settlement agreements are often offered to benefit the employer, so you should consider whether the offer proposed to you meets your needs or whether you may be able to gain more value by negotiating.

In the following guide, the expert employment solicitors at Ramsdens will explain how settlement agreements work and how you may be able to get the most out of your circumstance.

What can be offered in a settlement agreement?

When being offered a settlement agreement, your employer can include both financial and non-financial payments.

Financial aspects

Your employer may offer you payments for any of the following:

● An additional, lump-sum payment for the termination of your contract or employment

● Payments that you are contractually obliged to take in line with your contract

● Payments in lieu of your notice period

● Payments for clauses included in the agreement, for example, a payment to incentivise you to agree to confidentiality

● Payouts of any bonuses or dividends from share schemes that you may otherwise miss out on when your contract is terminated

Non-financial aspects

Any non-financial compensation will vary depending on your type of employment and your circumstances. Not all employers will offer such payments, but you may be able to claim them in a counter-offer.

Non-financial compensation may include:

● Retaining company assets, such as a car, phone or computer

● Retaining company benefits, such as insurance

● Confidentiality or non-disparagement clauses to make your transition out of the position more smooth

What is the average settlement agreement payout?

As with any draft agreement, the issue that you must consider is the long-term implication of accepting such an offer, such as what it will mean for your future employment opportunities and earning potential. You should at least consider making a counter-offer before anything else so you do not regret your decision.

There is no minimum or maximum amount of compensation you can be offered in a settlement agreement, which will usually be calculated based on your earnings and length of service. If you are paid a lower salary, your settlement agreement will most likely reflect this and be relatively low. However, when compared with your monthly earnings, it may seem like you are being offered a lot.

How do I know if a settlement agreement is reasonable?

Whether a settlement agreement is reasonable will ultimately depend on what value it holds to you. If you do not believe you will be able to make a successful counter-offer, or you are worried about the implications of making a legal claim against your employer, the convenience of a legally binding agreement may seem like the most attractive offer. However, you should speak to an expert solicitor before you make any decisions, as they may be able to identify opportunities for you to benefit more and will inform you as to whether the settlement is or is not reasonable.

How can a solicitor help me with an unreasonable settlement agreement?

The specialist employment law team at Ramsdens Solicitors has helped many employees facing confusing settlement agreement terms to understand them and make informed decisions. We will discuss your situation with you to best understand your circumstances. We will then inform you of the best steps to take, whether that is accepting the agreement, submitting a counter-offer (which we will guide you through the process of) or continuing to make an unfair dismissal claim against your employer.

We will help you to understand your rights and identify opportunities that you would have not been able to find without the help of legal advice from a professional. By working closely with us, you have the best chance of being successful in any action you choose to take following the receipt of a settlement agreement offer from your employer.

To speak to our team today, call us on 01484 821 500. Alternatively, email us at or fill out an online contact form to arrange a time for us to call you back.