That surprises people, and it makes them suspicious. It should not. The reason is structural, not generous.
The agreement does not work without your adviser
A settlement agreement only binds you if you have taken advice on it from a relevant independent adviser, who must be named in the agreement and carry professional indemnity insurance. That requirement comes from section 203 of the Employment Rights Act 1996.
Without that advice, the waiver of your statutory claims is unenforceable. Your employer could pay you a substantial sum and still find you at a tribunal months later.
So the legal advice is not a courtesy extended to you. It is the mechanism that makes the employer’s payment buy them anything at all. Paying for it is simply the cost of obtaining a binding agreement — which is why the contribution is standard practice rather than a concession.
What the contribution usually is
The agreement will normally specify a fixed sum paid directly to your solicitor on production of an invoice, typically in the range of a few hundred pounds plus VAT. It is paid to the firm, not to you, and provided it is limited to advice on the terms and effect of the agreement it is not treated as taxable income in your hands.
What it covers — and what it might not
The standard contribution is intended to cover advice on the terms and effect of the agreement and the adviser’s certificate. That is normally all that is needed.
If matters go further — negotiating an increased payment, arguing over restrictive covenants, redrafting a reference, or advising on a discrimination claim that has not been properly reflected in the offer — that work may go beyond the contribution. A good solicitor will tell you at the outset whether your situation is likely to exceed it, what any additional cost would be, and whether the potential gain justifies it. Frequently the employer will agree to increase the contribution where genuine negotiation is required, because they still want the agreement signed.
Take the advice seriously
Because the advice is paid for by someone else, there is a temptation to treat it as a formality — a signature to be collected. It is not. This is your one opportunity to have someone independent tell you whether the offer is reasonable, whether you are waiving a claim worth considerably more, and whether the restrictions you are accepting will affect your next job.
Your solicitor’s duty is to you, not to the party paying the invoice. That is precisely what “independent adviser” means, and it is what the legislation is there to secure.
Talk to us
If you have been offered a settlement agreement, call our employment team on 0151 422 0982 and we will tell you where you stand.