Updated Guidance On Special Severance Payments For Academy Trusts

• Published date: 20 October 2021
• Subject Matter: Employment and HR, Consumer Protection, Retirement, Superannuation & Pensions, Redundancy/Layoff, Education
• Law Firm: Wrigleys Solicitors
• Author: Ms Alacoque Marvin

Additional requirements for academy trusts considering agreed exits for staff.

The Education & Skills Funding Agency (ESFA) has updated the rules for academy trusts considering making a special severance payment to a member of staff. These rules now reflect the Public Sector Exit Payments Guidance on Special Severance Payments published in June this year and the new Academy Trust Handbook which replaced the Academies Financial Handbook from 1 September 2021.

Further information on the updated Academy Trust Handbook can be found in our previous article (available on our website): Academy Trust Handbook 2021 - what's new?.

The new rules on ESFA / HM Treasury approval

In addition to the normal considerations for academy trusts making severance payments (set out below), trusts are now required to obtain prior approval from the ESFA where the exit package as a whole is '100,000 gross or more and includes a special severance payment; and/or any case where the employee earns over '150,000 gross.

What are special staff severance payments?

Special staff severance payments are payments which fall outside a member of staff's contractual or statutory entitlements when their contract comes to an end. For example, a payment in excess of an employee's entitlement to notice pay, statutory redundancy pay and/or contractual redundancy pay.

Such payments may be made when employment is terminated through mutual agreement, rather than through resignation or dismissal. They might also be contemplated following resignation or dismissal where there is a risk of claims being brought against the trust.

What must academy trusts consider before making a special staff severance payment?

Under part 5 of the Academy Trust Handbook, academy trusts must consider the following issues before agreeing to make a special severance payment of any size:

• whether the proposed payment is in the trust's interests;
• whether the payment is justified, based on a legal assessment of the trust's chances of successfully defending the claim and the likely costs of that defence; and
• a legal assessment of what a court or tribunal is likely to award if the claim were to be successful.

The guidance suggests that special severance payments should not be made in cases of gross misconduct or poor performance unless justified by the risk of claims, or the costs to the trust of taking an employee through performance management / capability procedures.

There are special requirements for ESFA approval for severance...