If you are an employer searching ‘settlement agreement calculator ACAS’, chances are you are already in a difficult position. You may have a member of staff you need to move on or a dispute you need to resolve, and no in-house HR team to call on. If that sounds familiar, we are here to help. We have been helping owner-managed businesses like yours across the UK for decades, and advising clients on settlement agreements is a key part of our work.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
What Is A Settlement Agreement?
Settlement agreements are one of the most reliable tools available to small employers who want to resolve staff issues without tribunal exposure. It is a legally binding contract that ends an employment relationship or resolves a workplace dispute on agreed terms. Once an employee signs one, they give up their right to bring certain tribunal claims against you. In return, you pay the employee an agreed sum of money.
We can help you assess whether a settlement agreement is the right route before you commit to any course of action.
What Makes A Settlement Agreement Legally Valid?
To be valid, a settlement agreement must fulfil various legal requirements. It must be in writing, it must relate to specific identified claims, and the employee must have received independent legal advice from a named, qualified adviser who is also insured.
How Does A Settlement Agreement Calculator Work?
There is no statutory formula for calculating what a settlement agreement sum should be. The figure is built from several components, and using a settlement agreement calculator helps you arrive at a valid starting point rather than making an uninformed guess.
The main components of a settlement sum are as follows:
- Notice pay. The employee is entitled to their contractual notice period, or their statutory minimum, whichever is greater. This is typically a taxable element of the payment.
- Statutory redundancy pay. Where the settlement arises in a redundancy context, the statutory calculation applies, based on the employee’s age, weekly pay, and length of service, subject to current statutory caps.
- Ex gratia payment. This is the additional sum you pay to the employer as an incentive to sign. It compensates the employee for waiving their right to bring claims against you. The first £30,000 of the overall settlement payment is generally free of tax and National Insurance, which makes the package more attractive to the departing employee and gives you a useful lever in negotiations.
- Potential claim value. If there is a realistic risk of an unfair dismissal or discrimination claim, the strength of that risk needs to be factored into your offer.
Our settlement agreement calculator at GAP HR accounts for all of these factors and produces a suggested figure based on your employee’s specific circumstances. We can help you use that figure as a credible starting point for negotiations, rather than going in too low and entrenching the dispute or offering more than the situation warrants.
Using A Settlement Agreement Calculator Alongside Protected Conversations
Before a settlement agreement is formally proposed, the process usually begins with what is called a ‘protected conversation’. Under section 111A of the Employment Rights Act 1996, a pre-termination discussion with an employee cannot generally be used against the employer as evidence in an unfair dismissal claim at tribunal. This gives both parties the space to speak frankly about a potential exit.
The ACAS Code of Practice sets out how these conversations must be handled to retain their protected status. An employer who mishandles the conversation risks losing that protection entirely, which can leave them in a significantly worse position than if they had said nothing. We support small business owners through the protected conversation process regularly, advising on what to say, how to document it, and how to respond if the employee reacts badly or involves a solicitor immediately.
The Importance Of Getting Settlement Agreements Right
For an owner-managed business, a poorly handled settlement agreement can be expensive. An invalid or poorly drafted agreement leaves you exposed to tribunal proceedings down the line. An offer pitched too low triggers a rejection and potentially hardens the employee’s position. An offer pitched too high costs money that a small business cannot afford.
We can help you decide whether a settlement agreement is appropriate in a particularly situation, calculate a fair and defensible figure, conduct the protected conversation, draft the agreement correctly, and manage negotiations with the employee’s solicitor through to conclusion. All initial enquiries are free of charge and without obligation.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
