Calculating the value of a settlement agreement isn’t always as easy as just typing some values into a calculator. Although our settlement agreement calculator will give you an ballpark figure to start settlement agreement negotiations, you should know that this number can increase or decrease depending on how the employee acts. You can’t make them accept your offer.It’s all about knowing how to play your cards.
Settlement Agreement Calculator
Our settlement agreement calculator takes into account a number of factors to help you work out an appropriate amount of money to offer each employee based on their circumstances.
How we calculate it
We think it’s good to be transparent on how this number is calculated, so that you can see what the important parts are that need to be taken into consideration.
The main sum carried out involves calculating how much money they would get during a regular statutory redundancy process to get a ballpark figure to start negotiations at, and then adding on extra money depending on if they have any protected characteristics.
Although there is no set way for calculating the appropriate amount during a settlement agreement, we use this value as a guideline discussions with employers and for making offers to employees.
Unfair and Constructive Dismissal
Unfair dismissal claims are what can happen when the incorrect process is followed when dismissing an employee.
Every employee with over two years’ continuous service has protection from unfair dismissal. This means that the formal process as detailed in the ACAS Guidelines must be followed when parting company.
Constructive dismissal is when you make a change to an employee’s terms and conditions (salary, hours, role, etc.), and they claim the result of this is as bad as you having fired them.
Both constructive and unfair dismissal claims can be avoided by doing a settlement agreement with the employee, where they sign away their right to sue you in return for some money.
Although the amount worked out by our settlement agreement calculator may seem like a lot to pay, it is important to consider the alternate costs if an employee takes you to tribunal, particularly if you then lose.
The following are the 2019/2020 average payout for unfair dismissal and discrimination cases:
|Case||Average payout||Maximum payout|
|Sexual orientation discrimination||£27,936||£96,645|
And these are just the payout awards for the employee. On top of this, you will have to cover legal costs, which will average out to about £15,000 for an unfair dismissal case, and £20,000 for a discrimination case.
You cannot claim these legal costs from the employee, even if you win.
If you lose the case, you will also have to pay the legal fees of your employee, which would be on average an extra £5,000.
These figures could mean that if you lost an average age discrimination case, the entire process could cost you as much as £58,794 – which doesn’t even include the lost work time having to go through this process.
That’s not to mention the fact that that’s only the average pricing. Depending on your situation, you could be out hundreds of thousands of pounds if you decide to not give your employee a settlement agreement.
Although it may seem like an unnecessary precaution, you only need to be taken to the cleaners once by an employee for your company to become bankrupt.
If you use the number calculated by our settlement agreement calculator, the employee should be absolutely happy to sign away all rights and leave you free of danger with that amount of cash.
For additional information about settlement agreements, please visit our settlement agreements information centre, where you can read more about the entire process.
Carolyne created Gap HR Services 19 years ago to help small businesses all around the UK deal with their employee issues
Gap HR are experts at employment law, who can help you through the entire settlement agreement process