Education briefing - Publication of the College Financial Handbook 2024

This follows on from the decision taken in November 2022 to reclassify further education and sixth form colleges into the public sector by the ONS.  Our earlier briefings on this can be found at: ONS Reclassification of College and ONS reclassification and further education and sixth form colleges: What does this mean for settlement agreements?

Many of the rules that applied to Colleges following reclassification were set out in bite sized guides produced by the Government last year.  It has taken another 12 months to produce the College Financial Handbook, which in many respects replicates many of the duties and obligations in the Academies Financial Handbook.  However, there are some important differences that apply to FE and sixth form colleges.

From the employment perspective, the two key areas where the handbook is relevant are in relation to the setting of senior pay and the entering into of settlement agreements.

Senior pay controls

The handbook makes it expressly clear that Colleges must adopt a Remuneration Code based on either the AOC’s Senior Post Holder Remuneration Code, or for Colleges that are registered with the Office for Students, the Higher Education Senior Staff Remuneration Code issued by the Committee of University Chairs.

The rules that applied and which were contained in the bite size guide in relation to senior pay remain unchanged.  In brief, for new appointments at or above £150,000 or performance related pay above £17,500, approval is required before the post is advertised.  For existing staff, approval must be sought in relation to any adjustment of total remuneration or terms and conditions that takes an individual to, or above, the defined threshold as set out in the Managing Public Money Framework.

For existing appointments, where remuneration already exceeds £150,000, approval is required for any pay award above 9%.  Where current remuneration is below £150,000 approval is required when a pay award over 9% takes it to or above that figure.  Approval would not be required if a pay increase of up to and including 9% takes the remuneration above £150,000.

Special staff severance payments

As previously set out in our earlier briefing, these are paid to employees outside of statutory or contractual requirements when leaving employment.  If a College is considering a staff severance payment above statutory or contractual entitlements, there are certain limits that apply where Colleges have delegated authority to act without seeking formal DfE approval.  Interestingly, the amount of special staff severance payment that a College can make before seeking formal approval remains unchanged at either £50,000 or the equivalent of three months’ gross salary, whichever is the lower.  This latter requirement is not replicated in the Academies Financial Handbook and it is uncertain why that restriction remains.  In practice, this can cause difficulties for organisations when seeking to settle difficult and complex claims in a timely manner.

For the avoidance of doubt, Colleges must in any event always obtain prior approval from the DfE before making a special staff severance payment of whatever amount where an exit package (which includes a special staff severance payment) is at, or above, £100,000; or where the employee earns £150,000 or more. 

Regardless of whether formal approval is sought in situations of this nature, colleges must consider whether the payment is appropriate, taking and documenting legal and HR advice, documenting the management and approval process, considering the appropriate level of payment, ensuring the college can support any non-financial considerations with evidence and also ensuring that any confidentiality clauses inserted into agreements do not preclude an individual from making a public interest disclosure.

Further briefings on this in relation to other areas of the handbook will follow.