What’s typically negotiable
The ex-gratia amount. This is the most-negotiated number. Initial offers are often a starting point chosen to anchor low; a typical counter is 50% to 100% above the initial offer, with a settlement landing somewhere in between. Your solicitor will give you a view of the local market range for similar roles and situations.
The reference wording. Agreeing the specific text of the reference is one of the most valuable and underused levers. A pre-agreed factual-plus-positive reference can be worth far more than another £2,000 of ex-gratia. Specifically agreed wording is usually attached as a schedule to the settlement.
Restrictive covenants. Non-competes, non-solicits, and confidentiality obligations can sometimes be shortened, narrowed, or removed entirely as part of the deal, particularly if the employer is keen to settle quickly or if the covenants in the contract are overly broad.
Legal fee contribution. The employer’s standard contribution is often £350-£750 + VAT, but it can be increased to cover negotiation time, particularly for larger or more complex deals.
Continuing benefits. Private medical insurance to a certain date, pension contributions during PILON or garden leave, share scheme treatment, and outplacement support are all sometimes added or extended.
Timing. Termination date, payment date, garden leave start, and treatment of accrued holiday can all be moved to align with another role, a holiday, or a benefits cliff.
What’s usually not negotiable
Statutory redundancy. Calculated by formula (age, service, weekly pay). Not negotiable; either you’re eligible and the formula applies, or you’re not. Use the redundancy pay calculator to confirm the figure.
PILON. Usually calculated by formula too (notice × normal pay). The figure can sometimes be increased (treating discretionary bonuses as included, for example) but the base maths is fixed. Use the PILON calculator to check the figure.
Holiday pay. Statutory accrued holiday must be paid out; the figure is fixed. Contractual holiday above statutory may or may not be paid out depending on contract wording.
The £30,000 tax-free allowance. Set by statute. Not adjustable. Allocation between statutory and ex-gratia within the £30k is a tax matter, not a negotiation point.
How to negotiate well
Take the time you’re entitled to. The Acas Code suggests at least 10 calendar days to consider an offer. Use it. Don’t commit verbally in the first meeting. The employer expects you to take the agreement away and come back with comments.
Get the solicitor instructed early. The solicitor will model the figures, identify what’s missing, and shape the counter-offer. Their letter back to the employer carries more weight than an email from you directly.
Lead with the ex-gratia. Counter the ex-gratia amount first. Then move to reference, then to covenants and benefits. Each subsequent move tends to be easier to win once the financial centre of gravity has shifted.
Frame the counter constructively. Tribunal threats rarely work. Better is to frame the counter around fairness, market norms for the role and exit type, and specific costs you’ll be carrying (longer job search, loss of bonus, restrictive covenant effects).
Don’t over-negotiate. If the offer is already strong and the employer has signalled it’s near-final, accept rather than push. A drawn-out negotiation can damage the reference and lengthen the timeline for no extra money.
Worked example
An employer offers £15,000 ex-gratia, statutory redundancy of £8,000, PILON of £7,000, holiday pay of £1,200, total £31,200. Reference is generic. 6-month non-compete is unchanged from the contract.
A typical negotiated outcome might be: ex-gratia raised to £22,000 (closer to half a year of salary for a mid-senior exit), agreed factual-plus-positive reference, non-compete reduced to 3 months in writing, legal fee contribution increased from £500 to £1,000 to cover negotiation time. Total package: £38,200 plus the non-financial wins.
Related
- What is a settlement agreement?
- Do I need a solicitor for a settlement agreement?
- Settlement agreement calculator
- Redundancy pay tax explained
- Garden leave calculator
Frequently asked questions
- Should I accept the first settlement offer?
- Usually not. Initial offers are typically below what the employer is willing to pay, particularly the ex-gratia portion. Most settlements are negotiated up, often by 20-50% on the ex-gratia element. Your solicitor will give you a view on what the local market range is for your role and situation.
- What's negotiable in a UK settlement agreement?
- The ex-gratia amount, the reference wording, the announcement to colleagues, restrictive covenants (sometimes reduced or removed), legal fee contribution, payment timing, continued benefits (private medical, pension), share scheme treatment, and outplacement support. Statutory redundancy and PILON are usually not negotiable because they're calculated by formula.
- Will the employer withdraw the offer if I negotiate?
- Almost never. Withdrawing an offer to punish negotiation would look bad and most employers expect a counter. Section 111A of the ERA 1996 makes the pre-termination conversation 'protected', so even if negotiation fails, the offer can't be used against you in a later tribunal claim. The main risk of negotiating isn't withdrawal; it's that the timeline gets longer.
- How long does negotiation usually take?
- From first offer to signed agreement is typically 2-6 weeks. Simple cases settle in days. Complex cases (large packages, discrimination claims, restricted covenants) can run for 6-12 weeks. The Acas Code of Practice on Settlement Agreements suggests a minimum 10 calendar days for the employee to consider an offer, but employers often give longer in practice.
General information about settlement negotiation, not legal advice. Every situation is different and the levers that work depend on the specifics. For your case, contact ACAS or an employment-law solicitor.