A solicitor, or a qualified legal advisor, is legally required for a settlement agreement.
Settlement agreements are legal documents that formalise the terms of separation between an employer and employee. They help avoid potential future disputes or legal claims against the employer. However, many people wonder: are solicitors for settlement agreements necessary?
Legal Requirement for Independent Advice
The short answer is yes, a solicitor is required for a settlement agreement. According to UK law, for a settlement agreement to be legally binding, the employee must have received independent legal advice about the terms and effect of the agreement. This includes its impact on the individual’s ability to make any claims before an employment tribunal.
The legal advisor can be a solicitor, a certified trade union official, or a certified advice centre worker. They must have a contract of insurance, or professional indemnity insurance. This covers the risk of a claim by the employee in respect of loss arising from the advice.
Choosing Your Legal Advisor
While you have the freedom to choose your legal advisor, it is crucial to ensure that they have the required qualifications and expertise in employment law. The advisor should understand the nature of settlement agreements and be able to explain the terms and implications to you.
The role of the legal advisor is not just to explain the agreement, but also to provide advice. They should consider your specific circumstances, and advise on whether you are getting a good deal. They should also inform you about any potential claims you may be waiving.
Understanding Settlement Payment Tax
Settlement agreements can be subject to tax depending on the type of payment involved. Here’s a general breakdown:
- Payments for Salary, Bonuses and Holiday Pay: These are considered earnings and are taxable as income, subject to PAYE (Pay As You Earn) and National Insurance Contributions (NICs).
- Componsation Payments: Compensation for loss of employment can be tax-free up to £30,000. Any amount above £30,000 is taxable.
- Payments for Restrictive Covenants: If part of the agreement includes a restrictive covenant (a clause restricting future employment or business), this payment is also taxable.
- Non-Cash Benefits: If you receive non-cash benefits, such as shares, these may also be taxed.
Do I Need a Local Solicitor?
While it can be helpful to have a solicitor close to your location for face-to-face meetings, it’s not a requirement. Thanks to technology, many solicitors can provide advice over the phone or through video calls. This means that you can choose a solicitor based on their expertise, reputation, and cost, rather than their location.
Why Early Legal Advice is Critical for Your Settlement Agreement
It is essential to involve a solicitor as early as possible in the process. Once the terms of the agreement are decided, and you have signed the settlement agreement, it is usually too late to change the terms. Therefore, seeking legal advice before you agree to anything with your employer is crucial.
Solicitors can provide invaluable advice to ensure you understand the implications of the agreement. While a local solicitor might be convenient, you can choose an advisor based on factors such as expertise and cost, rather than how close they are to you. It’s important to hire a solicitor early on to make sure your interests are properly looked after.
Common Mistakes to Avoid in Settlement Agreements
Here are some common mistakes to avoid when negotiating a settlement agreement:
- Failing to Take Independent Legal Advice: It is important to seek independent legal advice to ensure you understand the terms and implications of the agreement. Not doing so can leave you vulnerable to unfair terms.
- Accepting the First Offer Without Consideration: Many employees make the mistake of accepting the first offer without negotiating. It is important to carefully assess the offer and, if necessary, make a counteroffer.
- Not Reacting Within a Timeframe: Not responding promptly can negatively impact your negotiation position. Settlement agreements often come with deadlines, so be sure to act quickly.
- Ignoring Flexibility in Negotiation: Settlement agreements offer flexibility. You can negotiate aspects, such as payment amounts, restrictive covenants and references.
- Make sure you understand your rights and strengths before entering negotiations.
Get Expert Legal Advice on Your Settlement Agreement – Protect Your Rights Today
If you’re considering a settlement agreement, it’s important to have a qualified solicitor on your side. Our experienced legal advisors will ensure you fully understand the terms, protect your rights and secure the best deal possible. Don’t wait until it’s too late: get professional advice before signing anything.
Contact us now to book your consultation and safeguard your future!
With over 10 years of experience in employment law matters, David Philip Harris specialises in providing legal advice on settlement agreements to both employees and employers throughout the UK. David’s opinion and advice are frequently sought after as he contributes often to BBC Radio Berkshire and the People Management Magazine. David Is a long-standing member of The Employment Lawyers Association and The Law Society.