Academy trusts are both charities and companies limited by guarantee, and must operate to further the trust's educational charitable purpose. They are accountable to the ESFA, the Secretary of State for Education as principal regulator, and the communities they serve for the education they provide to pupils. In making pay decisions in respect of their executives, academy trusts need to strike a potentially difficult balance between ensuring that recruitment and retention are effective, and that salaries are reflective of responsibilities, demonstrate value for money and are compliant with the Academies Financial Handbook.
Striking the Balance
Whilst academy trusts are free to set their own salaries for staff, they need to ensure that they use public money in compliance with the seven principles of public life. There is no calculator to ensure that decisions in relation to executive pay is correct. The ESFA's guidance therefore aims to support academy trusts in striking the balance effectively.
According to the ESFA's guidance, academy trusts should:
- Make all decisions on a consideration of relevant evidence.
The ESFA have identified a number of potentially relevant resources that may be helpful in informing executive pay decisions. These include school performance tables, Get information about schools, financial statements, the schools financial benchmarking tool, the gender pay gap service, performance tables for the respective key stages, the government's understanding your data website and the School Teachers' Pay and Conditions Document.
- Have a robust pay policy in place.
- Take into account evidence around academic performance, including key stage headline measures, Ofsted ratings and educational targets.
- Take into account the educational challenge they face.
This will include a consideration of the percentage of SEND and EAL pupils in the academy, and the level of deprivation in the academy's locality.
- Take into account their financial performance, including the academy trust's deficit/surplus position, the auditor's view of the trust, progress towards implementing auditor's recommendations and any requirement for additional financial support.
- Considering factors relevant to the degree of challenge in the given role, such as the undertaking of atypical responsibilities, existing concerns at trust level, the leading of future plans, additional accountabilities and responsibility for engaging the local community.
- Think about the experience of the executive.
This will include experience in improving educational and financial outcomes, school business management qualifications and experience, and other relevant qualifications.
- Calculate the cost of the total remuneration package including performance-related pay and bonuses, pension contributions, salary sacrifice arrangements and other taxable and non-taxable benefits.
- Consider whether it would be appropriate to appoint the executive on a fixed-term basis.
- Benchmark against local trusts of a similar size.
- Take into account the trust's characteristics, including its number of academies, number of pupils, range of provision, quality of provision and type of school.
- Consider the trust's location.
- Take into account cost ratios such as salary per pupil and cost of the total leadership team as a percentage.
- Consider proportionality and defensibility in the public sector market.
Determining executive pay is not an exact science. However, academy trusts need to be able to evidence and justify their decisions. The above factors together with other local considerations should be taken into account when making executive pay decisions and it is good practice to document these for future reference.
If you have any queries about the ESFA guidance or setting of executive pay, please contact Nick Murrell in our Employment Law team, on 0117 314 5627 or complete the below form.