The contracts of academy leaders should allow their pay to be cut if their trust’s financial position deteriorates due to poor management, new Department for Education guidance says.
The advice is outlined in Setting executive salaries: guidance for academy trusts, the first document of its kind published by the DfE after years of public concern over CEO pay.
Over the past 18 months, the DfE and the Education and Skills Funding Agency have ordered 213 academy trusts to justify high salaries, and the DfE said that during this time 51 had “revised down executive salaries”.
Quick read: DfE crackdown on academy leaders’ pay
Academies are free to set their own salaries for staff, and the guidance “aims to support trusts in making decisions about pay and further enabling the board to be confident about, and accountable for, these decisions”.
Its publication today comes two weeks after the latest version of the Academies Financial Handbook strengthened the wording around executive pay.
The new guidance sets out a series of “essential points” for trust boards to consider, including academic performance, educational challenge, financial performance and the experience of the individual.
In a category about financial performance, it says: “Provisions should be made under the contract of employment to revise salaries where the financial position of the trust deteriorates due to poor management.
“Trusts should ensure there is flexibility in the employment contract of the accounting officer [chief executive] to make downward adjustments if appropriate.”
It says that when reviewing existing salaries, questions to ask could include whether the trust has delivered its financial forecast, whether it is forecasting a deficit in the next three years that exceeds the operating surplus of the previous three years, and whether its pupil number projections have been realised.
The guidance also says that non-teaching staff should not be on a teaching employment contract, and so not entitled to salary protection to prevent or delay a “reasonable reduction” in salary, and their contracts should not include 14 weeks' annual leave as standard.
It also suggests that trust boards could ask whether staff turnover is high, which could indicate poor management.
Academies minister Lord Agnew said: “Over the last 18 months, I have committed to curbing excessive executive pay in a tiny minority of trusts to ensure it is fair and proportionate to the task in hand, and this approach is already yielding positive results.
“This new guidance will help all trusts set executive salaries at a level that is publicly justifiable.”