FE colleges: changes to senior pay approval thresholds

The threshold at which a college must obtain senior pay approval from the Chief Secretary to the Treasury has changed. In this article, we explain what has changed and the risks you face if you don't get approval when you should have done.  

Background

In 2022, following a review into the classification of the statutory FE sector (further education colleges, sixth form colleges and designated institutions) in England, the Office for National Statistics (ONS) reclassified colleges and their subsidiaries into the central government sector. Therefore, they became subject to the framework for financial management set out in ‘Managing Public Money’, guidance on senior pay and other central government guidance. 

Although colleges retained responsibility for determining pay, as well as terms and conditions for their staff, the reclassification introduced a requirement to obtain approval from the Chief Secretary to the Treasury before offering remuneration above specified thresholds. 

These thresholds have now changed. 

What are the new thresholds? 

An updated version of the ‘Guidance for the approval of senior pay’ has now been published setting out when an FE college must seek approval for appointments made on or after 26 June 2025. The College Financial Handbook, which provides an overarching framework for expectations of financial management and other controls, consistent with colleges' obligations as publicly funded bodies, has also been updated. 

You must obtain approval from the Chief Secretary to the Treasury for new appointments on or after 26 June 2025 when:

• the total remuneration exceeds the defined threshold of £174,000, or the pro-rata equivalent for part-time staff, or
• performance related pay ("bonus") arrangements exceed the threshold of £25,000, and
• it is a CEO appointment or equivalent, or is a position which attracts a total remuneration that is equal to or greater than that of a CEO.

However, you do not need approval if the role has been previously approved by the Chief Secretary to the Treasury and the proposed new total remuneration and performance related pay are the same as, or below what the current incumbent receives, or an increase of no more than 2%. 

Internal moves to a different post are considered a new appointment and you should follow the normal approvals process. 

For existing staff, you must obtain approval from the Chief Secretary to the Treasury for any adjustment of total remuneration or terms and conditions which takes an individual over the above defined threshold. 

For individuals already above the defined thresholds, you can apply annual pay awards without approval from the Chief Secretary to the Treasury if they are equal to or below 6%. But you need approval if the pay award is above that level.

In cases where pay awards up to and including 6% take an individual's total remuneration above the threshold, approval is not required. 

Temporary promotions, for example, from Deputy Chair to Chair, constitute an adjustment of total remuneration or terms and conditions, therefore you must obtain approval if the triggers set out above are met. The exception to this is where the proposed new total remuneration and performance related pay are the same as or below what the current incumbent receives, or amoun to an increase of 2% or less. 

Secondments are considered appointments, so the thresholds will also apply. 

For appointments made prior to 26 June 2025 the previous thresholds apply; approval was required where total remuneration is at or above £150,000 or performance related pay exceeded £17,500. 

What is included in total remuneration? 

Total remuneration includes all elements of base salary, fees, and pension in excess of normal levels and allowances. 

However, you should not normally offer to pay allowances (extra cash or non-cash benefits in kind aimed at supplementing an employee's total remuneration package) unless you have an exceptional business reason. 

Approval process

The ‘Guidance for the approval of senior pay’ sets out the process to seek approval and the criteria usually considered for all senior pay cases. Factors include:

• Influence and impact of the role
• The specialist nature of the role
• Labour market considerations
• Relevant supporting benchmarking data
• The package of the previous incumbent or any obvious comparators
• Location of the role; and
• Biographical information

What happens if there is a breach?

If you don't follow the ‘Guidance for the approval of senior pay’, you should seek retrospective approval from the Chief Secretary to the Treasury. They have the option of imposing financial sanctions which are set at a maximum of five times the remuneration package of the individual in question. Therefore, it is crucial that the guidance is followed to avoid any such breaches. 

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