As I explained in today’s email, it’s a legal requirement that an employee must take independent legal advice before signing a settlement agreement. You’re not obliged to pay for this advice but, in almost all cases, this is what happens. The employee may not be in a financial position to pay legal costs up front. It’s also slightly churlish to expect the employee to pay out their own pocket when the settlement agreement is mainly for the employer’s benefit.

Here are my tips on contributing to legal costs:

Offer a specific ‘contribution towards legal costs’ in any settlement offer. Generally, this would be around £300-£500 plus VAT for a straightforward agreement outside London and £500-£800 plus VAT in the London area. Don’t agree to cover all legal costs, which could be pricey! It might also encourage the employee and their adviser to drag out negotiations, knowing you’ll pick up the tab.

Make payment conditional on the employee signing the settlement agreement.

Employees are free to choose their legal adviser. But if you have negotiated with specific lawyers or firms and found them easy to deal with or agreed fixed panel rates with them, you can suggest your preferred advisers to the employee. You cannot compel the employee to use them, although you can refuse to contribute to the costs if they don’t.

Think carefully before agreeing to increase a contribution towards legal costs when you’re still negotiating with the employee. It might not get things resolved any quicker as it is money going into a third party’s pocket rather than the employee’s.