Nikola Flint from School Financial Success is Director of Corporate Services in a large secondary school, leading on all aspects of school organisation, with a background in accountancy and sixteen years' experience in the school management profession.
We remember a time when forecasting teacher pay budgets was a relatively straightforward task. Points on pay scales were set and staff auto-incremented through the scales with higher scrutiny and evidence at the upper threshold stage. Whilst this was not an ideal system to promote high performance and accountability at all levels, it certainly made multi-year budgeting simpler.
With progress came complexity, and now there are many possible cost options for the same group of teaching staff over a three-year period. Staff may only receive cost-of-living pay awards or they may be awarded salary progression of differing amounts. It feels impossible to predict. By comparison, budgeting for staff who are not on teaching terms and conditions tends to be a much easier exercise, if your structure for the coming year is known and staff are in post.
Here are some guidelines for your teacher pay budgets to support meaningful planning:
Get your set-up right:
For all schools, budget setting occurs before the outcome of the annual pay review is known (by the end of October). As teacher pay progression is usually backdated to 1 September each year, this produces a full year cost for an academy (year end 31 August) and a seven months’ pressure for a maintained school (year end 31 March). This makes even a one-year budget a bit of a guessing game. Multi-year budgets rely even more on estimates and assumptions. Everyone involved in school financial management should know and understand this cycle and its implications for accurate financial forecasting.
The Pay Policy should ensure that:
- all employees paid from within the school budget are fairly and consistently treated in relation to pay related issues.
- the school manages its staffing costs within overall budget limits, stating the lower and upper limits of pay ranges along with any notional ‘points’, if used.
- the terms ‘highly competent’, ‘substantial’ and ‘sustained’ are defined, enabling individuals to prove they meet these criteria to qualify for a higher pay award.
The Appraisal Policy should:
- set out the framework for a clear and consistent assessment of overall performance by teachers and the headteacher, informing any pay recommendations to governors.
- involve SMART objectives (Specific, Measurable, Achievable, Realistic and Time-bound), ensuring fairness and consistency for all staff. Objectives should also be appropriate to the appraisee’s role, responsibility and level of experience.
These policies should go through a process of consultation with unions, be approved by governors and be shared with school staff.
Critically, both policies should provide a robust evidence base for pay decisions.
Appraisee, appraiser and governor understanding
All parties must fully understand the objectives set and be able to assess progress towards these throughout the year, measuring success at the end of the appraisal cycle. There should be no surprises for the staff member in the pay recommendation and pay decision. Clarity at every stage will reduce the need for staff appeals and empower governors to make an accurate professional judgement based on the evidence provided.
Roles, responsibilities and pay recommendations
If objectives have been met, the appraiser will recommend pay progression. The headteacher then quality assures and moderates the process, making final recommendations to governors. Only following governor approval should the member of staff be informed of the decision.
A delegated Governor Committee will ‘approve’ or ‘not approve’ recommendations. A selected panel of governors will hear any individual staff appeals against any pay decisions made.
‘Pay without points’
The national teachers’ pay scales are now referred to as pay ranges, with a lower and upper limit. Schools can pay teaching staff anywhere they choose within these ranges, applying the freedoms of their Pay Policy as appropriate to individual performance.
Many schools continue to adopt notional ‘points’ within the pay ranges to create clarity for teachers, school leaders and governors. This allows the person setting a multi-year budget to forecast costs with some level of meaningful assumption. If not, the value of a ‘one-point equivalent’ may be included in the Pay Policy. Paying large numbers of staff at many different amounts can quickly become unmanageable and make forecasting difficult. This can be resolved by developing a more appropriate Pay Policy.
Multi-year budget planning for financial sustainability:
Financial forecasting software
Most schools now use financial forecasting packages rather than complex spreadsheets to forecast teacher salaries. With appropriate training, the software is easy to use. Reports should be straightforward for finance practitioners to interpret and easily understood by other stakeholders. In some packages, notes can be added to budget lines to detail where it links to the school’s development plan, which some schools may find useful.
- Ensure background settings and individual salary increments are triple checked so that the overall salary forecasts align with the school’s policy and any other known information.
- Avoid understating expenditure by creating a baseline scenario which assumes that every teacher will progress the equivalent of one move up their appropriate pay range. If some don’t, this will produce a variation on the teacher pay budget, which can be reallocated to meet other needs.
- Be sure to factor in any staffing structure changes which result in increased pay costs.
Include a realistic contingency budget to cover the cost of higher staff pay awards.
Consider what is possible and what is likely. The contingency budget will be based on professional judgement while ensuring some resource is available if eligible teachers are awarded the maximum pay progression.
‘Forecasting Your School’s Funding’
Our next School Financial Success guide will show you how to produce meaningful multi-year budget plans and a financial sustainability plan to secure financial success.
It will provide a process for forecasting your future funding, which is the missing piece of the jigsaw for multi-year budget planning. This will establish whether you will have sufficient funding to afford your current staff structure, allowing you to develop a strategic response if not.
Financial difficulties can’t be a justification for not recommending or approving an individual’s pay award. You need a holistic strategic plan if future funding is likely to become an issue for you. We hope that these pointers will help you to act early and find solutions to any challenging situations you may face.
To gain some more tips on how to lead a school budget review, including an easy to understand, logical process for carrying out a review, take a look at ‘Leading a School Budget Review’ by School Financial Success, available on Amazon. Alternatively, find out more about the range of solutions and services for academies and multi-academy trusts from Capita SIMS.