Trustees - New guidance on executive salary decisions

On the 9th July 2019, the ESFA released executive salaries guidance for academy trusts to help trusts challenge themselves to be prepared to be accountable, for ensuring that the use of public money spent on executive salaries is justified and appropriate. Trust boards need to be confident about their decisions and how they have come about. They need to be able to evidence that decisions on pay have been made from a robust, evidence-based process taking many factors into account.

It is important to remember that academy trusts are free to set their own salaries for staff.  With budgets being finalised currently for submission in the Budget Forecast Return (BFR) by 30th July, attention is focused on the 3-year budget requirement and obviously, forward planning.  If there are significant changes likely within this period, it could well be time to re-evaluate.

Where there is any potential change of senior executives, trustees should be considering a fresh look at remuneration packages, to ensure that the guidance is followed, and that evidence-based processes are in place to answer any challenge from the ESFA in connection with pay levels.  The autonomy for trust boards to make their own pay decisions works both ways, and any change in senior leaders can bring the opportunity to revisit previous levels, to explore if they are appropriate in today’s landscape, and whether the trust can balance the budget.

We all have heard of the Nolan Principles, the 7 principles of public life: selflessness; integrity; objectivity; accountability; openness; honesty and leadership.  Trust boards are tasked with ensuring that these principles underpin the use of spend of public money and ensure value for money. This new guidance takes the detail further in terms of evidencing executive salaries decisions and keeping an eye on ensuring they are appropriate.

There is a balancing act between ensuring reward for successful leaders, where high levels of salary could be justified, and ensuring a balanced budget. The guidance does offer good sources for evidencing these decisions and the kind of factors to consider, for robust decision making.  These include; academic performance; educational challenges (e.g. % SEND; %free school meals (FSM); %Looked After Children (LAC); %English as Additional Language (EAL); financial performance of the trust; benchmarking; broader challenges (such as expansion, any significant concerns at the trust etc); experience; ratios; gender pay gap issues (if over 250 employees); succession planning; pensions and of course the cost of the total remuneration package.

CEO or head teacher performance management benefits from external advisor input as we know, to support the trustees in evaluating the performance of the last year and to ensure appropriate targets are set for the year ahead.  Where there is a new appointment, the ESFA guidance highlights areas to be considered when setting the package offered to new recruits and will no doubt, in some cases, allow the backbone for some refreshed offerings.

If you would like help to review your budgeting, benchmarking or financial forward planning please contact Sally Timmins.