Why the employer pays
A settlement agreement only waives your statutory claims if you have had independent legal advice. The employer is the one who needs the waiver, so the employer funds the advice. The contribution is written into the agreement, typically as "a contribution of up to £X plus VAT towards the employee's legal costs".
How much employers contribute
| Type of exit | Contribution commonly seen |
|---|---|
| Standard agreement, terms already acceptable | £350 to £750 plus VAT |
| Some negotiation or a longer agreement | £750 to £1,500 plus VAT |
| Senior executive, share plans, disputed claims | £1,500 plus VAT and upwards |
These are typical figures, not limits. London firms and complex cases cost more.
What the contribution covers
The contribution is priced for the statutory minimum: reading the agreement, advising you on its terms and effect, and signing the adviser's certificate. It normally covers:
- a review of the agreement and your contract;
- a call or meeting to explain the terms and answer your questions;
- a view on whether the offer is reasonable;
- minor amendments;
- the signed certificate.
It may not cover a detailed assessment of your claims, several rounds of negotiation, or advice on share schemes and tax. Ask your solicitor at the outset what is included and get a fixed fee for anything extra.
If you need more than the contribution
- Ask the employer to raise it. Explain what extra work is needed. Many employers agree, because a well-advised employee produces a settlement that sticks.
- Agree a fixed top-up fee. So you know the cost before the work is done.
- Check other funding. Trade union membership and legal expenses cover attached to home insurance sometimes pay for employment advice.
- Weigh the return. A few hundred pounds of negotiation that adds thousands to the package is usually worth it.
How the fee is paid and taxed
Your solicitor invoices you but marks the invoice as payable by your employer, and the employer pays the firm direct. Handled that way, under the terms of the agreement and for advice on the termination only, the payment is exempt from income tax and does not use any of your £30,000 allowance. If the employer pays the money to you instead, it is taxable. See tax on settlement agreements.
VAT is normally included in what the employer pays, because the advice is supplied to you and the employer cannot reclaim it.
Choosing your own solicitor
Your employer may suggest a firm. You do not have to use it. The adviser must be independent of the employer, and you are free to choose anyone who meets the statutory definition. What matters is that they deal with settlement agreements regularly, can turn the work round inside your deadline, and tell you the fee position up front.
Frequently asked questions
Does my employer have to pay my legal fees?
There is no legal duty, but it is near-universal practice. The Acas guidance recognises that employers normally pay.
What if the fee contribution is not enough?
Ask your employer to increase it. This is a routine request and often agreed, especially where the agreement is long or the terms are being negotiated. Otherwise agree a fixed fee with your solicitor for anything above it.
Do I pay if I decide not to sign?
The employer's contribution is usually conditional on signing, so you could be liable for the advice you received. Ask your solicitor how they handle this before you start.
Is the legal fee contribution taxable?
No, provided it is paid by your employer direct to your solicitor, under the settlement agreement, for advice on the termination of your employment.
Sources
About this guide. This page is general information, not legal advice, and reflects the law and published government plans on the date shown above. Frederick George is a legal referral service, not a law firm. For advice on your own circumstances we will introduce you to an SRA-regulated solicitor.