Settlement Agreement Solicitors: Role, Fees, and Negotiation

If you’ve been handed a settlement agreement by your employer, you are legally required to take independent advice from a qualified adviser before it can bind you, and settlement agreement solicitors are the usual choice because the law under Section 203 of the Employment Rights Act 1996 makes that advice a condition of the waiver’s validity.¹ Employers almost always pay a fixed contribution toward the fee, and in most cases the solicitor’s job is finished within a few days of first seeing the draft.

Why the Law Requires a Solicitor

A settlement agreement — formerly a compromise agreement — is a contract in which you give up the right to bring tribunal or court claims against your employer in exchange for a payment and other agreed terms. For that waiver to actually work, the Employment Rights Act 1996 sets out several conditions. The agreement must be in writing, must relate to a specific complaint or proceedings, must identify the independent adviser by name, and must state that the statutory conditions have been met.¹² A blanket waiver of “all claims of any nature” is not enough; the particular claims being settled have to be identified clearly enough that both sides know what is being given up.³

Above all, you must have received independent legal advice on the terms and effect of the agreement before signing. If that step is skipped, the agreement is not legally binding and you keep the right to pursue your claims at a tribunal — leaving the employer, if they have already paid, trying to recover the money while still facing the claim.⁴ That is why employers insist on you seeing a solicitor, and why they usually pay for it.

What the Solicitor Actually Does

The statutory minimum is narrower than most people assume. The solicitor’s core job is to explain the agreement’s terms to you, advise you on how signing will affect your ability to bring tribunal claims, and then sign the agreement themselves to certify that this advice was given.⁵ They must also hold professional indemnity insurance covering the risk of misadvising you.⁴

In practice, a competent employment solicitor goes well beyond that. They will review the financial package for fairness, flag entitlements that are missing or undervalued (accrued holiday, bonus, commission, pension contributions), check whether any restrictive covenants are reasonable, and suggest amendments to clauses that would unfairly limit what you can do after you leave.⁵ The distinction matters when you’re choosing one: the law only requires an explanation of the terms, but a good solicitor evaluates whether those terms are worth accepting.

If a solicitor gets the advice wrong and you lose out as a result — for example, by waiving a valuable claim too cheaply — your remedy is a professional negligence claim against the solicitor, covered by their indemnity insurance. It is not a fresh claim against your former employer.⁴

Does It Have to Be a Solicitor?

No. The law also allows the independent advice to come from a certified trade union official or an authorised advice centre worker, provided they hold written certification from their organisation confirming they are competent to give the advice and carry professional indemnity insurance.⁶ The adviser must be independent of your employer; anyone employed by or acting on behalf of the employer does not qualify.⁷ Most people still use a solicitor because specialist employment firms turn the work around quickly and the employer’s contribution is designed to cover their fee.

Fees: Who Pays, and How Much

There is no legal obligation on your employer to pay for your advice, but it is standard practice. If an employer refuses to contribute, employees are often reluctant to sign, which defeats the point of asking for a settlement in the first place.⁸

Typical employer contributions range from £350 to £500 plus VAT for straightforward agreements.⁹ Some firms now treat £500 plus VAT as a reasonable floor, with £550 to £600 plus VAT more realistic for the roughly two hours of work involved in reviewing the terms, assessing the merits of any claim, and finalising the agreement.¹⁰ Higher contributions are common for senior employees or where the facts are complex.

The Employment Appeal Tribunal looked at this directly in Solomon v University of Hertfordshire (UKEAT/0258/18/DA, 2019). It accepted that £500 plus VAT might cover a basic explanation of the terms but called it “wholly unrealistic” to suggest the same figure covered professional advice on the merits and value of a tribunal claim.¹¹ If your case involves real negotiation, expect the work to cost more than the standard contribution.

Where the fee goes above the employer’s contribution, the shortfall is normally yours to pay, though the solicitor can try to negotiate a higher contribution as part of the deal.⁹ Legal fees paid by the employer directly to your solicitor in connection with the termination are generally tax-free and do not eat into the £30,000 tax-free allowance on compensation.¹²

From Offer to Signature: What to Expect

Settlement discussions often begin with an informal, off-the-record conversation. Where no dispute already exists, your employer may rely on a “protected conversation” under Section 111A of the Employment Rights Act 1996, which keeps the discussion confidential for the purposes of ordinary unfair dismissal claims.¹³ If a dispute already exists, the “without prejudice” principle plays a similar role.¹⁴

Once you have a written offer, don’t sign anything on the spot. Acknowledge receipt with a neutral reply confirming you intend to take independent advice, then pull together your employment contract, recent payslips, and any correspondence that bears on the dispute before contacting a solicitor.¹⁵

The ACAS Code of Practice recommends you be given at least 10 calendar days to consider the offer.¹ Some employers impose tighter deadlines, but these are usually negotiable once a solicitor is on record.¹⁵ The agreement only binds you once you’ve received independent advice and both parties have signed. Many deals wrap up in a few days; negotiation extends the timeline.

How a Solicitor Negotiates

Employers generally expect some pushback, and this is where a solicitor often earns their fee several times over. The initial offer is rarely the best the employer will agree to.

Your leverage comes from the strength of any underlying claims. A credible unfair dismissal, discrimination, or whistleblowing case gives the employer a financial reason to settle more generously, because defending tribunal proceedings — which take, on average, twelve to eighteen months to reach a final hearing — is expensive and reputationally awkward.¹⁶ Procedural failings on the employer’s side, such as a botched redundancy consultation, strengthen that position further.

Negotiation isn’t only about the headline compensation figure. Solicitors routinely push on several non-financial points:

Agreed reference wording. A verbal promise isn’t enough; a specific template reference should be appended to the agreement.¹⁷
Restrictive covenants. Non-compete and non-solicitation clauses carried from your contract can be shortened, narrowed, or dropped altogether as part of the settlement.¹⁷
Extended benefits. Continued medical insurance, outplacement support, or pension contributions beyond the termination date.¹⁶
A larger legal fee contribution where the standard figure won’t cover the work.¹⁶

One practical warning your solicitor will give you: don’t resign before terms are agreed. Resigning strips away much of your leverage, because the employer no longer faces the cost of a formal disciplinary or redundancy process.¹⁶

What the Solicitor Will Check in the Drafting

Most settlement agreements follow a similar structure, and a specialist will go through each clause with you. The ones to pay particular attention to are the termination date and notice treatment, the breakdown of financial terms and their tax treatment, the waiver of claims itself, confidentiality (with mandatory carve-outs for whistleblowing), the tax indemnity (which obliges you to reimburse the employer if HMRC later challenges the tax treatment), the agreed reference, restrictive covenants, and the legal advice certificate your solicitor signs at the end.¹⁸

Tax Structuring

How a payment is taxed depends on what it represents, and getting the structuring right can make a material difference to what you take home. The first £30,000 of genuine compensation for loss of employment can generally be paid free of income tax and employee National Insurance.¹⁹ Anything above £30,000 is taxable. Other elements — unpaid salary, accrued holiday, bonuses, and payments in lieu of notice — are taxed as normal earnings.

Where you don’t work your full contractual notice period, the slice of the termination payment representing unworked notice is taxable under the Post-Employment Notice Pay (PENP) rules. HMRC applies a statutory formula:²⁰

((BP × D) ÷ P) − T, where BP is basic pay in the last pay period before the trigger date, D is calendar days in the post-employment notice period, P is calendar days in the last pay period, and T is any termination-related payments already subject to income tax.

Only the amount left after the PENP deduction can benefit from the £30,000 tax-free allowance. If the formula produces a nil or negative figure, no extra tax is due on that element.²¹

Claims You Can’t Sign Away

Most statutory and contractual employment claims can be settled: unfair dismissal, wrongful dismissal, discrimination under the Equality Act 2010, whistleblowing detriment, breach of contract, unpaid wages, bonus, or holiday pay.²² Some things, however, can’t be waived no matter what the agreement says:

Accrued pension rights already built up under an occupational pension scheme.³
Personal injury claims you don’t yet know about at the point of signing.²²
Claims arising from events after the date of signing.³
The right to make protected disclosures under the Public Interest Disclosure Act 1998.³
Criminal liability.

If the Employer Has Behaved Improperly

The protection of a Section 111A conversation falls away where there has been “improper behaviour” by the employer. The ACAS Code gives examples: harassment, bullying, intimidation, physical threats, discrimination connected to a protected characteristic, and undue pressure such as threatening dismissal before any disciplinary process has started or refusing you a reasonable period to consider the offer.¹⁴ A solicitor will ask about how the offer was made for this reason: the protection also doesn’t apply to discrimination or automatic unfair dismissal claims (including those arising from whistleblowing) in any event.³

Choosing a Solicitor

Specialisation in employment law is the single most important factor. Solicitors who handle settlement agreements regularly are quicker to spot undervalued claims and missing entitlements, and more likely to turn the work around inside the deadlines you’ve been given.²³ Check that the fee quoted will be covered in full by the employer’s contribution, or clarify in advance what you’ll pay if negotiation takes the work beyond that figure.

All solicitors in England and Wales are regulated by the Solicitors Regulation Authority and must follow the SRA Code of Conduct, which requires them to act in your best interests, avoid conflicts of interest, and treat you fairly.²⁴ If you’re unhappy with the service, complain to the firm first. Unresolved service complaints go to the Legal Ombudsman; serious conduct issues such as dishonesty, fraud, or conflict of interest can be reported to the SRA, which has power to fine, rebuke, or refer solicitors to the Solicitors Disciplinary Tribunal.²⁵

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