The Department for Education (DfE) is placing greater scrutiny on severance payments made by academy trusts, particularly where payments exceed an employee's statutory or contractual entitlement. Recent investigations have highlighted weaknesses in decision-making and supporting documentation, reinforcing the importance of robust governance, regardless of the value of the payment.
For academy trust leaders, managing a staff departure can be a sensitive process. There may be employment disputes to resolve, financial considerations to balance and a desire to reach an agreement that is in everyone's interests. However, as academy trusts are responsible for public funds, any severance payment must be properly justified, authorised and supported by clear evidence.
It is not just the size of the payment that matters
Under the Academy Trust Handbook 2026, trusts must obtain prior DfE approval where the non-statutory or non-contractual element of a severance payment is £50,000 or more. Approval may also be required for lower-value payments in certain circumstances.
However, the £50,000 threshold should not be viewed as a dividing line between payments requiring detailed justification and those that do not.
The DfE expects academy trusts to apply the same level of scrutiny and business justification to lower-value payments as they would to those requiring prior approval. Every special severance payment must demonstrate value for money and have a clear, documented rationale.
For trustees and accounting officers, the question is not simply whether a payment falls within the trust's delegated authority, but whether the decision could withstand external scrutiny.
Would your documentation withstand a DfE investigation?
Recent investigations have highlighted the importance of retaining comprehensive evidence when considering severance arrangements.
One example raised by the DfE involved a trust that had sought legal advice regarding a proposed severance payment but had not retained documentation assessing its prospects of successfully defending the matter at an employment tribunal.
Despite having obtained legal advice, the absence of this supporting evidence was considered a failure to meet the DfE's expectations and triggered further investigation.
This illustrates an important distinction. Seeking professional advice is not enough. Trusts must also demonstrate how that advice informed their decision and why the resulting payment represented value for money.
The Academy Trust Handbook makes clear that where legal advice indicates a trust has at least a 50% chance of successfully defending a case, a settlement should not be offered. Where a settlement is justified, the amount must also be less than the legal assessment of what a tribunal would be likely to award.
These requirements make it essential that trusts obtain appropriate advice and retain clear records of the decision-making process.
A checklist for stronger governance
The DfE provides a dedicated Guide to academy trust severance payments, which should form part of every trust's procedures when considering a settlement.
Before agreeing a special severance payment, trustees and senior leaders should be satisfied that:
A clear business case has been documented, explaining why the payment is in the trust's interests.
Appropriate legal advice has been obtained, including an assessment of the likelihood of successfully defending a tribunal claim.
Alternative options have been considered and the reasons for rejecting them recorded.
The proposed payment represents value for money.
The correct governance and approval procedures have been followed, including obtaining DfE approval where required.
Supporting documentation has been retained and is available for inspection.
Importantly, this approach should apply to all special severance payments, not just those exceeding the DfE's approval threshold.
Severance payments are more than an HR matter. They are an important test of an academy trust's financial governance and internal controls.
Even where a settlement is commercially reasonable, inadequate documentation can leave trustees and accounting officers exposed to questions about how public funds have been used.
With the DfE continuing to examine severance arrangements, academy trusts should take the opportunity to review their existing policies, delegated authorities and approval processes.
Introducing a consistent checklist, ensuring legal assessments are properly documented and maintaining a clear audit trail can help protect both the trust and those responsible for its governance.
Ultimately, good governance is not simply about making the right decision. It is about being able to demonstrate, potentially years later, why that decision was appropriate.
How Forrester Boyd can help
Our specialist academies team supports academy trusts with financial governance, internal controls and compliance with the Academy Trust Handbook.
If your trust would benefit from reviewing its financial procedures or understanding the requirements surrounding severance payments, please contact our education specialists.
Further guidance
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
