On 29 November 2022, the Office for National Statistics announced that it had reclassified further education and sixth form college corporations, and their subsidiaries, into the public sector. They are now part of central government.

Colleges continue to be self-governing charities but are now subject to the Managing Public Money (“MPM”) framework. This imposes significant financial and accounting changes which, in turn, will limit how much colleges can pay their senior staff, the circumstances in which they can enter into a settlement agreement and how much they can pay someone to settle actual or potential claims.

We consider each of these:

Senior pay controls

Colleges still remain responsible for setting the pay of their workforce. However, they now fall within the scope of HM Treasury’s (“HMT”) senior pay controls process which allows the government to ensure that senior pay is set at an ‘appropriate level’.

The Education and Skills Funding Agency (“ESFA”) have said that they will update the existing guidance on senior pay to reflect the principles set out in HMT’s guidance and will work with the sector to make sure that colleges are able to seek approval for any new or amended reward packages that fall within the scope of the controls.

The HMT guidance states that the Chief Secretary to the Treasury must approve remuneration when an appointment will attract:

• Total remuneration at or above the defined threshold of 150,000, or the pro-rata equivalent for part-time...

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