The Academy Trust Handbook has been updated to clarify that trust boards must document their approach to setting executive pay in “an agreed pay policy”.
The 2025 handbook, published today, states: “The board must discharge its responsibilities effectively, ensuring its approach to, and levels of, pay and benefits is transparent, proportionate and defensible. This must be documented in an agreed pay policy, which sets out the process for determining executive pay.”
In the 2024 handbook, trusts had to have an agreed process for determining executive pay, but the phrasing of this as an “agreed pay policy” was not previously specified.
The handbook previously also said that the Education and Skills Funding Agency (ESFA) could challenge inappropriate pay and benefits. This statement has been removed with the closure of the ESFA, and rephrased as: “Decisions about executive pay may be challenged by Department for Education.”
MATs under scrutiny over CEO pay
In a letter to trust accounting officers, Andrew Thomas, director of the DfE’s funding and financial oversight directorate, said the handbook had been updated to provide “greater clarity about the process for trusts determining executive pay”.
Tes’ analysis of CEO pay at the largest trusts during 2023-24 (the most recent year for which accounts are available) revealed that just over a third of CEOs saw their pay increase by at least £10,000 year-on-year.
There were at least six CEOs at the biggest MATs earning £250,000 or more a year.
In November 2023 the ESFA wrote to 37 trusts to question the amount their CEOs were paid in 2021-22. They were found to be compliant, but sector leaders have called for a national framework for executive salaries.
‘Repercussive’ transactions
The DfE has also updated its definition in the handbook of a “repercussive” transaction to specify that these include transactions that could cause additional costs for other parts of government. “Novel, contentious and repercussive” transactions must be referred to DfE for approval.
A repercussive transaction is one “likely to set a precedent and cause pressure on other trusts or the broader public sector to take a similar approach and hence have wider financial implications, including where a trust’s proposal could cause additional costs to arise for other parts of government”.
Related-party transactions
The DfE has today also published guidance on financial support and oversight for trusts, and guidance on managing conflicts of interests and related-party transactions.
After the ESFA’s final closure earlier this year, financial support and oversight for schools is now overseen by the DfE’s regions group.
The guidance states that now the DfE will use budget forecast return data to identify academy trusts at risk of deteriorating financial health and will then engage with them.
Financial difficulty
The DfE says signs of potential financial difficulty include declining reserves, repeated deficits, the trust not having enough money to pay its debts, staff costs as a high percentage of income, declining pupil numbers, urgent need to resolve estates issues or repeated variance between budget forecasts and actual expenditure.
As previously set out, on some occasions the DfE may provide financial support to trusts, which is usually repayable over three years through the General Annual Grant (GAG).
“In serious cases of financial difficulty, we may also require a Qualifying Floating Charge (QFC) on repayable support to protect government funds should the academy trust become insolvent,” the guidance states.
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