There is no formula for a settlement agreement, and any calculator that claims to produce one number from your salary and service is guessing at the only part that is actually negotiable. What can be computed exactly is everything else, and that is more useful than it sounds: once the fixed parts are on paper, what remains is the number the two sides are really arguing about.
Part one: what you are owed anyway
Start with the money that would be payable with or without an agreement. In a redundancy that is the statutory redundancy payment, computed under section 162 of the Employment Rights Act 1996 from the age bands, service capped at 20 years, and a week's pay capped at 751 pounds for a redundancy on or after 6 April 2026, to a statutory maximum of 22,530 pounds. Add accrued untaken holiday and any wages or bonus already earned. None of this is consideration for the agreement; it is arrears.
Part two: notice
Next comes the notice element, computed from section 86 of the Act read against the contract: one week under two years' service, one week per year between two and twelve years, twelve weeks at twelve years or more, or the contract if it is longer. Notice is the most consequential line in the whole document, because whatever it is called, the sum attributable to notice is taxed as earnings. Two offers of the same headline value are worth different amounts after tax if they split this line differently.
Part three: the compensation, which is the negotiation
What is left is the ex gratia element, and it is the price of the certainty the employer is buying. Nothing in statute sets it. What moves it in practice is the strength of the claim being given up, how much a defended tribunal claim would cost the employer in time and fees, whether a reference and confidentiality are being agreed, and how quickly the employer wants it done. This is the number a calculator cannot know, and pretending otherwise is where most settlement calculators go wrong.
Why there is no published average
Settlement agreements are private and normally confidential, so there is no register, no regulator return and no dataset from which a national average could be computed. Tribunal awards are published, but an award is what a claim was worth after a hearing rather than what an employer paid to avoid one, and the two are not the same population. This site records that no such figure is published rather than quoting one: an average nobody measured is worse than no average at all.
Questions people ask about settlement agreement how much
How much should a settlement agreement be?
There is no statutory answer. Compute what you are owed anyway, then the notice, and treat everything above those as the negotiated part. Judging whether that part is fair means assessing your own claim, which is what the independent adviser is for.
What is the average settlement agreement amount in the UK?
No such figure is published. Settlement agreements are private, so no dataset exists to compute an average from, and tribunal awards measure a different thing. Any number presented as a national average is an estimate someone made up.
Does a settlement payment replace my redundancy pay?
It should not: statutory redundancy pay is an entitlement rather than consideration for the agreement. Check that the document lists it as a separate line, because how the payment is apportioned changes the tax treatment.