Do I have to get independent advice before signing a settlement agreement?

Yes, it is a statutory requirement to take independent advice before signing. This advice must come from a solicitor, union representative, or advice-centre worker. If you sign the agreement before receiving this advice, it is invalid. The employer is generally required to pay a contribution towards these legal fees.

Who pays for the independent legal advice?

The employer must pay a contribution towards your legal fees, with £500 to £1,000 being a typical amount. This payment covers the cost of the independent advice required by law. You should discuss the specific contribution amount with your employer or legal adviser during the negotiation phase.

What parts of a settlement agreement can I negotiate?

You can negotiate several aspects of the agreement, including the financial amount, the wording of any reference, post-termination restrictions, and tax structuring. You may submit a counter-offer to your employer to reach a mutually acceptable outcome before the final document is signed.

Is a settlement agreement legally binding once signed?

Once the final agreement is signed, it is binding on both parties. Both sides must comply with the terms, which typically include making payments, providing references, returning company property, and maintaining confidentiality. The agreement resolves the statutory employment claims it covers.

All Legal Journeys

Employment Law

UK-wide

5 stages

2–6 weeks

Reviewed 2026-05-22

Settlement agreement journey

From employer's offer through independent advice, negotiation, and signing of a binding s.203 ERA 1996 settlement.

This page covers UK-wide law. Where local procedure differs (e.g. courts or tribunals), this is noted in the relevant section.

Who Uses This Journey

Employees offered a settlement agreement to compromise statutory employment claims.

Stage-by-Stage Timeline

Receive the offer

Employer presents agreement. Marked 'without prejudice subject to contract'.

Take independent advice

Statutory requirement — solicitor, union rep, or advice-centre worker. Employer must pay a contribution to legal fees (£500–£1,000 typical).

Common Mistakes to Avoid

Signing before advice — invalid

Negotiate

Counter-offer on amount, reference wording, post-termination restrictions, tax structuring.

Sign

Final signed agreement is binding. £30,000 of termination payment is tax-free under s.401 ITEPA 2003.

Compliance

Both sides comply with terms (payments, references, return of property, confidentiality).

Official Sources

ERA 1996 s.203

Frequently asked questions

Do I have to get independent advice before signing a settlement agreement?: Yes, it is a statutory requirement to take independent advice before signing. This advice must come from a solicitor, union representative, or advice-centre worker. If you sign the agreement before receiving this advice, it is invalid. The employer is generally required to pay a contribution towards these legal fees.
Who pays for the independent legal advice?: The employer must pay a contribution towards your legal fees, with £500 to £1,000 being a typical amount. This payment covers the cost of the independent advice required by law. You should discuss the specific contribution amount with your employer or legal adviser during the negotiation phase.
What parts of a settlement agreement can I negotiate?: You can negotiate several aspects of the agreement, including the financial amount, the wording of any reference, post-termination restrictions, and tax structuring. You may submit a counter-offer to your employer to reach a mutually acceptable outcome before the final document is signed.
Is a settlement agreement legally binding once signed?: Once the final agreement is signed, it is binding on both parties. Both sides must comply with the terms, which typically include making payments, providing references, returning company property, and maintaining confidentiality. The agreement resolves the statutory employment claims it covers.