How much money should I get in my settlement agreement?
If you’re reading this you’re probably thinking about leaving your job here in Britain and negotiating a settlement agreement package, either due to a redundancy situation or a dispute – unfortunate circumstances perhaps, but all too common, especially in this day and age.”How much money should I get in my settlement or compromise agreement” is probably the question which we get asked the most.
In this article we try to look at some of the factors which might indicate how much you should get. We have broken these down into internal & external factors, as well as dispute or redundancy.
Top 3 TIPS
- Try our Compromise Calculator (on the right);
- Be prepared to fight if you want more; and
- Get legal representation, evidence & witnesses.
If the redundancy is genuine and the selection process is fair, then all you’re really entitled to is the statutory minimum, which you can find out more about in our redundancy article here.
If, however, the redundancy is a sham, or your employer has fudged the results somehow, then how much money you should get in your compromise or settlement agreement will be similar to a dispute situation, as set out below. In this situation it is worth finding out whether you have been placed in a ‘pool’ for comparison with other colleagues, and if so, who the other colleagues in the pool are, and what are the selection criteria for deciding which employee is made redundant.
If you’ve not been placed in a pool then what is the business reason for selecting you, and in fact, are there other people who should have been placed in a pool with you based on their written or customary job description. If so, you could put this information into a written grievance and submit it to your employer during the redundancy process.
In a dispute there are a number of factors which combine to determine how much you should get:
- Annual Income:
the more you get paid, the more you should get, but then the more expensive it is for the employer to pay you off. This is the most important factor regarding how much you should get.
If you are nearing retirement age then any claim could be of a higher value because it could be harder for you to get another job, therefore your economic loss could be greater. This is especially true if your job is quite specialist and hard to come by anyway.
- Number of years worked for current employer:
The longer you’ve worked somewhere the more you’ll get, partly because you’ll have a rapport with the HR department and partly because you may know too much about them and be valued by your colleagues, so they will want you to go quietly.
- Notice period:
Normally we would go for your notice period as a lump sum, and then go for a couple of months’ money on top as a starting point, depending on the case. Of course if your notice period is very long, like 6 months, then your less likely to get anything on top of this.
- Number of employees:
The bigger your company is the more money they have to spend. Simple. Furthermore, bigger companies often prefer not to have legal battles going on with ex employees.
If you are currently facing his then generally you can expect less. This is because, regardless of the strength of your defence, the employer will undoubtedly try to blame you for the situation.
- Performance review:
If you are currently facing his then generally you can expect less. This is because your employer could probably manage you out of the business through a PIP, so why would they pay you off instead?
- Sick leave:
Being on sick leave can help to increase how much you should get, especially where you have lots of paid sick leave remaining. If there’s a dispute, it makes sense for employers to pay you this money as a lump sum rather than keep you on the payroll but off sick. We’re not doctors but if your GP signs you off sick for stress for example then don’t try to fight that.
If you are party to information such as fraud or malpractice within the company then they will often want to pay you off to keep your mouth shut. See our whistleblowing article here. Of course they may want to defend their conduct too, so make sure you have a couple of emails or documents proving the wrongdoing.
Where you have suffered discrimination this looks bad for your employer so you should get more money, so long as you have some evidence, ideally a witness and/or emails. No employer wants the public to know that they are discriminatory, even though many are in practice.
If you have submitted a grievance then often the employer will want to pay you off rather than spend time and money investigating your complaint. Why not copy some of our grievance letter templates, here. This is also a good way to flush out the employers defence in writing before you resign, which allows you to hone your claim later if you have to go to Tribunal.
- Tax savings:
It might be that instead of your employer paying you your notice pay net of tax, and them having to pay employer’s NI on it too, you can convince them to pay you an equivalent sum in a tax free ‘ex gratia’ payment. If this is worded correctly in your compromise or settlement agreement is can be attractive to both sides, and can increase how much you will get. Unfortunately a lot of employers are paranoid about using this tax break and so may well refuse. If you don’t ask you don’t get however.
- Legal representation
If you approach your company with specialist lawyers on board, then you will probably receive a lot more money because your employer will realise that you might take them to tribunal therefore they had better take you seriously. Furthermore, the right lawyers would present your case in the strongest possible light.
- How much would a tribunal award
This largely depends on whether you get another job quickly or not (as your losses are based on your actual financial loss from being out of work) but there is a statutory cap of one year’s income for unfair dismissal awards. On top of that there is a £25,000 limit for breach of contract claims (such as not being paid your notice period or wages).#
If your claim is for discrimination or detriments due to whistleblowing you will also claim compensation in the same way as for unfair dismissal (but there is no upper limit to the award for compensation) and you may also be awarded an amount for ‘injury to feelings’ that reflects how serious the discrimination was (normally from around £500 – £30,000).
How much you should get in your settlement agreement depends to a large extent on the strength of your evidence. The best type of evidence, which is also the rarest, is witness evidence. If you are lucky enough to have a witness at work willing to stand up for you, then we suggest that you ask them to sign a written statement quickly, before they change their minds! Obviously its a risky business being a witness for a colleague against your employer, and for this reason it is unusual to have any witnesses at all. Which just leaves you with other types of evidence…
After witnesses, written evidence is the most important type, then audio evidence has its place too. Unfortunately most employers won’t put any discriminatory comments in writing, because people know about discrimination nowadays and the fact that its illegal. Its more common to find employers committing to writing emails containing evidence of say victimising whistleblowers, breaching contracts, or constructively unfairly dismissing someone. If you can’t get emails, then consider recording meetings on your phone so that at least you have audio evidence. This can be used in tribunals if necessary, and is great for catching out employers for lying later on in the process. Once they know that you have evidence of them lying, they are more willing to reach a swift settlement agreement, naturally.