Kate Brooks
Partner, Solicitor & Head of Employment/HR Services
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Date Published:22 May 2017 Last Updated:18 Jan 2022

How much should I expect to receive in settlement of my employment rights?

Employment Law Advice

There are no set rules about how much am employee should receive in return for agreeing to settle employment rights.

A settlement of employment claims usually includes the following heads of agreement:

  1. Agree a termination date and reason for termination. The employee will be paid normal wages (to include any bonus/commission payments) and a payment in lieu of any outstanding holiday accrued up to the termination date. Wage payments should have tax deducted at source;
  2. Agreement over notice period i.e. garden leave (employee employed during notice but not required to attend work); payment in lieu of notice (employment ends straight away and employee receives a lump sum in lieu of notice) which in some situations can be paid tax free; employee waives the right to receive notice; or the employee works their notice;
  3. Tax free termination payment. The first £30,000 of a compensation payment can be paid tax free. The amount of the termination payment will depend on the value of the employees potential claims and/or any other relevant circumstances;
  4. Agree a reference and announcement to colleagues; and
  5. Employer makes a contribution towards legal fees for the employee to have the agreement explained.

The size of the termination payment will depend on the circumstances. In a situation where the employee is guilty of gross misconduct, simply agreeing a reference may be acceptable. In a case where an employee threatens serious tribunal claims then the amount of the settlement payment is more likely to be in line with the type of compensation that the employee may claim in the tribunal i.e. net loss of earnings until such time as another job is secured.

ACAS have published a comprehensive guide in relation to settlement agreements with further information.

If you need help negotiating, please contact me on 01202 057754 or kate.brooks@ellisjones.co.uk.