Settlement agreements

Can I negotiate a settlement agreement?

Yes. A settlement agreement is a contract, and the first offer is rarely the employer's best one. You can ask for more money, a better reference, a different leaving date or other terms. How much you can achieve depends mostly on how strong your potential claims are and how much the employer wants a clean exit.

Updated 11 November 2026

What gives you leverage

  • The strength of your claims. A poor process, a weak reason for dismissal, discrimination or whistleblowing all raise the value.
  • The employer's need for certainty. Employers pay to avoid a tribunal claim, management time and publicity.
  • Timing. Offers made before a restructure, a disciplinary outcome or a deadline are often more flexible.
  • Evidence. Emails, grievance records and a clear timeline make your points harder to dismiss.

What you can ask for besides money

  • An agreed reference and an agreed announcement to colleagues
  • Your leaving date, garden leave or payment in lieu of notice
  • Payment for untaken holiday and any bonus or commission due
  • Keeping your laptop or phone, or outplacement support
  • A mutual non-disparagement clause, not just one that binds you
  • A higher contribution to your adviser's fees

Tax: the £30,000 rule

A genuine compensation payment for losing your job can usually be paid with the first £30,000 free of income tax and National Insurance. Notice pay, holiday pay, salary and bonuses are taxed in the normal way, even if they are paid as part of the settlement. Check how the agreement splits the payment, because the split affects what you actually receive.

How to negotiate

  1. Ask for the offer in writing and take time to read it. The Acas Code says you should normally have at least 10 calendar days to consider it.
  2. List your potential claims and work out roughly what each might be worth.
  3. Reply in writing, marked "without prejudice", with a clear counter-proposal and short reasons.
  4. Keep the tone calm and factual. Threats rarely help; a credible claim does.
  5. Before you sign, get advice from an independent adviser. The agreement is not binding without it.

Mistakes to avoid

Do not sign anything on the spot, however much pressure there is. Do not resign before you have the agreement. And if your employment has already ended, remember that negotiating does not stop the tribunal time limit. Contact Acas in time to protect your position while talks continue.

FAQs

01Will negotiating make the employer withdraw the offer?
It is possible but uncommon. Most employers expect a counter-offer. A reasonable, reasoned counter-proposal is normal.
02Can the employer use our negotiations against me?
Discussions marked without prejudice, and protected conversations about ending employment, generally cannot be used as evidence in an unfair dismissal claim. The protection can be lost if the employer behaves improperly, and protected conversations do not cover discrimination or whistleblowing claims.
03Who pays for advice on the agreement?
Employers usually contribute to the cost of independent advice. The contribution is often negotiable.

Official sources

Related ProHearings pages