Settlement agreements are common in employment disputes, but one question often arises: Who is responsible for paying the solicitor’s fees when drafting or advising on these agreements? This article explores the dynamics of who covers these costs and why solicitor involvement is crucial.
What is a Settlement Agreement?
A settlement agreement (formerly known as a compromise agreement) is a legally binding contract between an employer and an employee. Typically used in situations of employment termination, it outlines the employee’s severance package in exchange for waiving their rights to bring claims to an employment tribunal or court.
Why Do You Need a Solicitor for Settlement Agreements?
Settlement agreements are legally complex, so it’s essential for employees to receive independent legal advice before signing. A solicitor ensures the agreement meets legal standards, protects the employee’s rights and verifies the terms are fair. Without legal advice, the agreement cannot be legally binding.
Who Typically Pays the Solicitor’s Fee?
In most cases, the employer offers a contribution toward the employee’s legal fees for advice on the settlement agreement. This practice is standard because one of the requirements for the agreement to be valid is that the employee has sought independent legal advice.
How Much Will the Employer Contribute?
Employers usually contribute a set amount toward the solicitor’s fees, but this can vary depending on factors like:
- The complexity of the agreement
- The employee’s role and seniority
- Length of service
While some employers may cover the entire fee, others might offer a partial contribution, leaving the employee responsible for the remainder.
What if Legal Costs Exceed the Employer’s Contribution?
If the solicitor’s fees exceed the employer’s contribution, the employee may need to cover the additional costs. It’s important to request an estimate from the solicitor in advance to avoid unexpected expenses.
Special Circumstances & Variations
Certain circumstances can influence who pays for the solicitor’s fee. For example, if the employee negotiates enhanced terms or the agreement is particularly complex, the legal costs may increase. Additionally, some employers may have specific policies that differ from standard practices, which could alter the amount they’re willing to contribute.
Clear Communication is Key
Open communication between the employee, employer, and solicitor is essential. It’s crucial to clarify who is responsible for covering the solicitor’s fees and ensure this agreement is documented. Addressing any potential cost issues before the agreement is finalised helps prevent disputes.
Conclusion: Who Pays for a Settlement Agreement Solicitor?
In most cases, employers contribute to the legal fees for settlement agreements, but the amount can vary. Employees should seek independent advice and confirm their financial responsibilities upfront to avoid any surprises. Clear communication and proper planning will help both parties navigate the process smoothly.
For more information on settlement agreements, you can refer to the UK Government’s Guide on Settlement Agreements or the ACAS Guide.
If you need further advice, our expert employment solicitors are here to help. Request a callback today for personalised guidance on your settlement agreement.
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.