What percentage do lawyers take for personal injury?

There once was a simpler time when you could expect to receive 100% of your compensation when you made a claim for personal injury compensation. This was because it was recognised that you should not have to pay for the legal fees you incur – which are needed to pursue a case – as you would end up out of pocket. I.e. you would not have been fully compensated.

But the government in its infinite wisdom caved to pressure from the vastly wealthy insurance industry who have many friends amongst parliament. The result? Victims losing out…

So you might know that you will be charged, but how are all these percentages worked out and explained? You may already have seen that law firms left, right, and centre are charging all sorts of different things, and many of them don’t explain what you are exactly going to have to pay.

It’s confusing!

But if you are seeking a much needed explanation then you have come to the right place. At The Injury Lawyers we pride ourselves on communicating to our clients in plain English, we thought we’d write this little article to try and put you in the know about the charges.

What is the charge?

The percentage now being charged is usually to cover something called a Success Fee. This Success Fee used to be recoverable from the opponent until the government went and (frustratingly) changed the law. As a result of this, the success fee is now commonly deducted from your compensation.

What is a Success Fee?

A Success Fee is a fee that is usually worked out as a percentage of your lawyer’s legal fees for pursuing the case. It exists because lawyers can offer you a no win, no fee guarantee which means you will usually not be charged if a case loses. Offering a no win, no fee is obviously quite risky for a law firm because in many cases we cannot guarantee that you will win a case unless we actually pursue it. Pursuing it means us lawyer’s spending money on you and then potentially having to write that money off if you don’t win.

The percentage is often worked out depending on the risk of the case – so for riskier cases we may charge a higher success fee based on the costs we incur.

BUT – and this is a very big one – there is usually a difference between what the Success Fee actually is and what you are charged.

The law change means that the amount for the Success Fee can now be deducted from your compensation, but there is a cap on it meaning that no more than 25% from your claim for injury and past losses can be used to cover the fee. Now, 25% of your damages is obviously going to be dependent on whatever you actually recover – but whatever that amount is does not reflect what the Success Fee actually is because that is based on a potentially different percentage of our own fees.

The Success Fee could be 50% of our costs, for example. But by law we can only recover up to 25% of that fee from you. So the amount of the actual Success Fee charge is usually different from the fact that most lawyers will take up to 25% from your claim.

Confused? Here’s an example

We’ll keep the figures nice and easy here. Let’s say:

You receive £5,000 in compensation
Our legal fees are £1,500

What percentage lawyers take?

Now let’s say our Success Fee is 50% because your case is risky. That is 50% of our legal fees, which is half of £1,500, which equals £750.

The Success Fee is now recovered from your compensation, but only up to a maximum of 25%. If you work out 25% of £5,000, this is £1,250. So £1,250 is the most that can be taken from your damages to cover the Success Fee.

You may have spotted that £1,250 as the cap is more than our actual Success Fee charge, so you should only actually be charged £750 because that is what our actual Success Fee is.

Now let’s say you only recover £1,000 in compensation and we still have the same fee. Well, 25% of £1,000 is £250; so this is now the cap. Because the actual charge to you is capped at 25%, we cannot charge you the full £750 of our Success Feel; instead we can only recover up to the cap which is £250. We therefore have to write off £500 of our Success Fee, and you are charged £250.

Get it? Hopefully you do. The key thing to remember is that the actual Success Fee charge is not always what you will actually be deducted. The percentage taken from your claim is usually to cover whatever that Success Fee amount is, which can be different depending on the case.

OK, I get it – so why are different law firms charging different things?

In a lot of cases lawyers will end up having to write off some of their Success Fee so some lawyers have figured out that they can get round this by charging you additional amounts that are not classed as a deduction to cover the Success Fee. They can only take up to 25% from you by law to cover their Success Fee, but that doesn’t stop them charging this and then charging an additional, say, 10% for ‘other fees.’

Some law firms are taking at least 25% to cover the Success Fee and then charging additional percentages of 10% or 15% – and then some have fixed fees, insurance fees, administration fees, introduction fees, fees, fees, and more fees!