Colleges caught offside by rules on staff send-offs

Colleges are still breaking government spending rules on exit payments almost four years after they were reclassified as public bodies, FE Week has found.

The Treasury’s ‘managing public money’ rules mean that FE colleges need Department for Education sign-off before making large staff severance payments, including those worth £50,000 or more.

But DfE figures released via a freedom of information request show that in 2024-25, of 28 special payment requests, six colleges made “retrospective” requests once cash had already been paid out. Officials subsequently rejected four of these requests.

In 2023-24, the first full academic year following reclassification, 35 special payment requests were made, 12 of which were retrospective and half of those were rejected.

This academic year, data running up to June shows that colleges made five retrospective requests, with officials rejecting two so far.

In cases where DfE officials or ministers refuse to support retrospective requests, colleges can face extra government scrutiny, including formal intervention, and are forced to publicly flag the rule breach as a regularity “qualification” in their financial accounts.

In its 2024-25 accounts, Windsor Forest Colleges Group reported making a £23,282 special severance payment to a former junior staff member “without the requisite approval” from the DfE. Colleges were required at the time to request approval for payments worth more than three months of the recipient’s salary.

According to the college’s recent board minutes, CEO Gillian May told governors the rule breach was an “oversight” by the HR and finance teams that only “came to light” after the sum was paid.

May, who left the college in May to become a deputy FE commissioner, said the payment was significantly higher than the employee’s three-month figure because the potential costs of going to an employment tribunal were a bigger risk.

She added the DfE rejected the request as it did not want retrospective approvals to be “taken as precedent”.

A spokesperson for Windsor Forest Colleges Group declined to comment on why its former staff member was threatening court action, or what internal steps it has taken to avoid future rule breaches.

Capital City College breached the rules the year before, after making a special payment in 2024 without “documented approval”.

According to its 2023-24 accounts, the breach occurred because the college “anticipated” approval so made the payment in advance “to minimise potential costs”.

The DfE initially approved the sum but later changed its decision to “non-approval” because the payment had already been made.

A Capital City College spokesperson said: “Severance payments have a role to play where they are in the best interests of all concerned and represent value for money.

“We hope to avoid situations where such payments are necessary, and the case cited dates back to 2024.

“The appropriate steps were followed with the DfE, with no action taken against the college.”

Severance payments are a routine part of an employee’s job ending and can include outstanding salary, holiday pay and redundancy pay, as well as compensation or a contribution to legal costs.

LTE Group, one of the largest colleges in the country, made 58 severance payments in 2025, down from 91 in 2024.

However, it only made one special severance payment in 2024-25, worth £7,100.

Only ‘exceptional’ circumstances

The Treasury’s managing public money rules are designed to ensure public sector bodies such as colleges, government departments and quangos are working to “high standards of probity”.

Guidance for colleges, set out in the DfE’s college financial handbook, says special severance payments should only be made in “exceptional” circumstances as they can set a poor example to the public by appearing to “reward failure”.

It adds: “Colleges must not use special severance payments as an easy alternative to proper management action, to avoid difficult decisions, disciplinary processes, unwelcome publicity, or reputational damage.”

Currently, colleges must ask for approval before making special severance payments of £50,000 or more, if they are included in an exit package of £100,000 or more, are made to a staff member earning more than £174,000, or if the payment is made alongside a confidentiality agreement or other “novel, contentious or repercussive” aspect.

In recent years, the DfE has updated its rules, including by removing a three-month salary trigger for approval where the payment was under £50,000, and increasing the higher earner threshold from £150,000 to £174,000.

Next year’s handbook clarifies that government approval is also required from next month if legal advice determines that a college has more than a 50 per cent chance of winning a claim at an employment tribunal or in arbitration.

The highest value of special payment requests came in 2023-24 when they totalled £1.7 million.

Good money management

Association of Colleges deputy chief executive Julian Gravatt said the managing public money rules were placed on colleges without notice in November 2022, when colleges were once again classified as public sector organisations.

He added: “Some of the rules make sense, but it never made sense to require civil service sign-off for some quite trivial decisions.

“In the three-and-a-half years since these changes, we’ve had some cases where colleges didn’t apply the rules properly and where they had to seek retrospective approval. But we’ve had just a handful of qualified audits on their accounts and, as time has gone by, the DfE has raised some of the thresholds to limit their checking.

“Ultimately, college governing bodies and senior leaders are the ones responsible for managing public money. In the main, they do this very well.”