How much is a settlement agreement worth?

Settlement agreement values have three components. First, your statutory entitlements: redundancy pay (if applicable, based on age, service, and capped weekly pay) and notice pay (pay in lieu of notice for your statutory minimum notice period). Second, the ex gratia element: compensation negotiated for the claims you are waiving. Third, a contribution to your legal advice costs.

The ex gratia payment is driven by your claim strength. For a routine departure without a strong claim, employers typically offer 1–2 months' salary. For a genuine unfair dismissal claim with good evidence, 2–4 months. For discrimination claims — which are uncapped at Tribunal — 3–6 months or more, because the employer's litigation risk is higher. These are starting points; strong evidence, a credible claim, and an experienced solicitor can significantly improve the outcome.

The first £30,000 of total termination payment is tax-free. Anything above this is taxable at your marginal income tax rate. PILON is always fully taxable regardless of the threshold.