How Much Should Employers Pay for Settlement Agreement Legal Fees in the UK?

Expert Guidance on Fair Legal Contributions for Settlement Agreements in the UK

Settlement agreements are a common way for employers and employees to part ways amicably—especially in cases of redundancy, workplace disputes, or mutual exits. Under the terms of a settlement agreement, an employee waives their right to bring claims against their employer in exchange for compensation. But to make this agreement legally binding, the employee must receive independent legal advice—and it’s standard practice for the employer to cover the legal costs involved.

So, how much should employers pay toward an employee’s legal fees for a settlement agreement? At Kalra Legal Group, our expert employment solicitors break it down.

💼 Typical Employer Contributions Toward Legal Fees

The amount employers contribute to settlement agreement legal fees varies significantly depending on:

• The complexity of the situation

• The employee’s seniority or pay level

• Whether the agreement is standard or part of a larger exit negotiation

• The region and the solicitor’s hourly rate

In the past, many employers offered as little as £250 plus VAT, but this figure is now widely considered outdated and inadequate.

🔍 Current Market Standards:

• £350–£400 + VAT is common but still low in many cases

• £500 + VAT is considered a reasonable minimum for basic advice

• £550–£600 + VAT better reflects the actual cost of two hours of legal advice, which is often necessary to:

  • Review the terms and effect of the agreement

  • Advise on any potential claims or risks

  • Finalise and sign the agreement

⚖️ Legal Insight: Solomon v University of Hertfordshire (2019)

In this key case, the Employment Appeal Tribunal (EAT) commented that £500 + VAT is reasonable for explaining the terms of a settlement agreement—but not for providing in-depth advice on whether the offer is fair or if the employee has stronger claims.

This ruling shows that employers must be realistic if they want the agreement to hold up or avoid disputes later. If you’re offering a quick exit without following a formal process, your contribution to legal fees must reflect the true cost of legal advice—not just box-ticking.

👩‍⚖️ Our View as Specialist Employment Solicitors

At Kalra Legal Group, we regularly advise both employers and employees in settlement agreements. Here’s what we know from experience:

• Most employees don’t just want the terms explained—they want advice on whether they should accept the offer or pursue a better one.

• Low contributions undermine trust and can lead to rejected agreements, delays, or tribunal claims.

• Offering a fair contribution helps you complete the process faster, more smoothly, and with reduced legal risk.

If you’re using a settlement agreement to avoid a formal performance, grievance, or redundancy process, it’s even more critical to offer appropriate legal fees. In high-value or complex cases, employers often negotiate a higher split between the severance payment and legal fee contribution to ensure costs are fully covered.

🚨 Why Underpaying Legal Fees Can Backfire

• Employees may refuse to sign if they can’t afford legal advice

• Solicitors may not agree to act for the employee due to time limits or low fees

• If disputes go to tribunal, low fee offers can be used against the employer in a costs claim

• It increases the risk of non-compliance or claims that the employee didn’t fully understand their rights

✅ Best Practice: How Much Should Employers Offer?

We recommend employers offer:

• £500 + VAT as a baseline for standard cases

• £550–£600 + VAT for more thorough advice, especially where the agreement is part of a more complex termination

• Higher contributions where multiple claims are being waived or there’s a clear imbalance in bargaining power

This ensures that the agreement is valid, fair, and final.

📞 Need Advice on Legal Fee Contributions for Settlement Agreements?

Whether you’re an employer preparing a settlement agreement or an employee unsure about legal fees, we’re here to help.

At Kalra Legal Group, we:

• Offer same-day settlement agreement reviews

• Provide advice on terms, fairness, and risks

• Help negotiate better compensation packages

• Ensure that the legal fees are fairly covered by your employer

📩 Request a consultation today or speak to one of our employment solicitors. We provide clear, expert advice with fast turnaround and transparent pricing.

By Suraj Purohit.

Employment Paralegal at Kalra Legal Group.

04/06/2024