The average settlement agreement payout in the UK is £5,000 to £25,000. Here is how to check if your offer is fair in 2026.

Written by SettlementCheck Editorial TeamFigures in force from 6 April 2026 (SI 2026/310)Last reviewed: July 2026

In 2026, the average UK settlement agreement payout typically falls between £5,000 and £25,000. Under UK employment regulations, your statutory redundancy pay is calculated against a weekly pay cap of £751 in Great Britain ¹ (£783 in Northern Ireland ²). Most fair settlement offers represent 1.5x to 4x of your statutory minimum entitlement. If your employer offers only the statutory minimum, they are paying nothing extra to buy out your right to make a tribunal claim.

Key payout facts

Typical settlement amounts range from 1.5x to 4x of your statutory minimum entitlement.
Your employer covers your solicitor fees to review and sign the agreement, which keeps it free for you.
Under s.403 of ITEPA 2003, the first £30,000 of redundancy or ex-gratia compensation is completely tax-free.

Typical Settlement Payouts by Scenario

Settlement payouts depend heavily on the reason for your departure and the strength of any potential legal claims. For unfair dismissal scenarios, the legal maximum compensation is capped at £123,543 ⁵ or one year's gross salary. The table below outlines typical ranges observed in 2026.

Average settlement agreement payouts by scenario UK 2026
Departure Scenario	Typical Range	Statutory Multiplier
Straightforward Redundancy	£5,000 to £15,000	1.5x to 2.5x statutory minimum
Procedural Unfair Dismissal	£8,000 to £25,000	2.0x to 3.5x statutory minimum
Whistleblowing or Discrimination	£20,000 to £75,000+	4.0x statutory minimum or higher

Key Components of Your Settlement Payout

Your final settlement figure is rarely a single lump sum. It is normally structured as a combination of different components, each with unique legal and tax properties.

1. Ex-Gratia Payment (Tax-Free Uplift)This is the core negotiating component. It is a discretionary payment from your employer to compensate for the loss of your job. Under Section 403 of the Income Tax (Earnings and Pensions) Act 2003, the first £30,000 of redundancy or ex-gratia compensation is paid tax-free up to £30,000 ³.

2. Pay in Lieu of Notice (PILON)Notice pay is subject to tax. Whether you work your notice period or receive it as a lump sum, it remains fully taxable as earnings under Section 402D of the Income Tax (Earnings and Pensions) Act 2003 ⁴ (see our PILON tax guide).

3. Statutory Redundancy PayIf your role is redundant, you are entitled to statutory redundancy pay under Section 119 of the Employment Rights Act 1996 ⁷. The formula applies 0.5 weeks of pay per year under age 22, 1 week per year aged 22 to 40, and 1.5 weeks per year aged 41 and over, capped at 20 years. The weekly pay is capped at £751 in Great Britain ¹ (£783 in Northern Ireland ²), making the maximum statutory redundancy award £22,530.

4. Solicitor Legal Fees ContributionA settlement agreement is only legally binding if an independent, qualified adviser reviews it with you. Your employer pays your fees for this review. This contribution is paid directly to your solicitor and is tax-free under HMRC Extra-Statutory Concession A81 ⁶.

How to Calculate if Your Offer matches the Average

To evaluate whether your settlement offer matches typical UK averages, you should follow this structured process:

1
Identify your statutory baseline
Calculate your statutory redundancy and notice entitlements. This forms the absolute floor. Any signed agreement must pay at least this baseline.
2
Determine the appropriate multiplier
Assess your leverage. If your employer followed a poor procedure, apply a multiplier of 1.5x to 2.5x to your baseline. If you have evidence of discrimination, a higher multiplier applies.
3
Verify the tax structure
Ensure the ex-gratia component and PILON are separated correctly. Separating them protects you from unexpected tax bills under the tax indemnity clause.
4
Calculate your estimated net settlement
Use our independent calculator to check your figures and compare your package against typical ranges.

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Frequently asked questions

What is the average settlement agreement payout in the UK?

Typical settlements in the UK range between £5,000 and £25,000. This represents 1.5x to 4x of your statutory minimum entitlement. The exact amount depends on your salary, length of service, notice period, and any live legal claims.

Do I have to pay tax on my settlement agreement?

Under Section 403 of the Income Tax (Earnings and Pensions) Act 2003, the first £30,000 of compensation for loss of employment is tax-free. Notice pay (PILON) is always fully taxable as earnings under Section 402D.

Who pays my solicitor's legal fees for a settlement agreement?

Your employer covers the fees for your solicitor to advise you on the agreement terms. This contribution usually ranges from £350 to £750, and your employer pays your solicitor directly under HMRC rules.

Can I negotiate for a higher settlement payout?

Yes. The initial settlement offer is rarely the employer's final offer. You can negotiate a higher payout if you have evidence of unfair procedures, discrimination, or if the statutory minimum entitlement provides a solid floor to build from.

References and Legislation

Disclaimer: SettlementCheck is an independent introduction service and calculator, not a law firm. The information on this page is for general guidance only and does not constitute formal legal or tax advice. Confirm your specific offer using our free calculator.