Department for Education Publishes Updated Guidance on Authorisation for Special Severance Payments in the FE Sector

The Department for Education (DfE) has recently published updated guidance on authorisation for Special Severance Payments (SSPs) within the further education (FE) sector. The new rules simplify aspects of the approval process but also introduce new requirements that colleges need to be aware of.

Previous position

Under the previous arrangements, any FE college wishing to make a SSP in excess of statutory or contractual entitlements, was required to obtain the DfE’s prior approval. This approval process often led to delays and additional administrative steps for colleges.

Key changes to the authorisation process

The DfE has now amended its guidance, removing the need for prior authorisation in most cases. Colleges will no longer need to seek approval for SSPs unless they fall into one of the following categories:

• Payments including a non-statutory or non-contractual element of £50,000 or more
• Payments of £100,000 or more that include a special severance element
• Payments to individuals earning over £174,000

If a proposed SSP falls within one of these thresholds, DfE authorisation must still be obtained before the payment is made.

Greater flexibility

This change will be welcome news for FE colleges, as it provides a greater degree of flexibility and autonomy in managing settlement negotiations. However, the DfE has simultaneously introduced a new requirement for approval in relation to confidentiality clauses within severance agreements.

In practice, this means that any settlement agreement containing a confidentiality provision linked to a severance payment will require DfE authorisation, regardless of the payment’s value. Further clarification on the operation of this new rule is expected when more detailed guidance is published.

Maintaining transparency and value in decision making

Even with increased flexibility, colleges must continue to ensure that every severance payment represents good value for public funds, ensuring the same checks are applied to smaller payments as to those exceeding £50,000.

When considering a severance proposal, colleges should build a clear, evidence-based business case that answers the following key questions:

• Is the payment justified? Severance should only be offered where there is a legitimate business reason. For example, it should never be used to resolve cases of misconduct.
• Is the process transparent and documented? Maintain a robust record of the decision making and approval process, ensuring compliance with internal governance and employment law.
• Are all non-financial factors evidenced? Where wider organisational or reputational considerations are relevant, ensure these are recorded and can be justified.
• Does it represent value for money? The decision should demonstrate that the outcome offers better value than alternative options, including potential litigation.

What this means for FE colleges

While the relaxation of certain approval requirements should streamline processes, the new confidentiality clause restriction introduces a new layer of compliance. Colleges should review their internal procedures for settlement agreements and ensure that HR and legal teams are aware of the need to seek DfE approval where relevant.

In the meantime, FE institutions should:

• Review template settlement agreements for confidentiality provisions
• Monitor upcoming DfE detailed guidance for further clarification
• Seek legal advice before entering into any settlement involving a severance payment

Get in touch

For further information on the updated DfE rules on special severance payments and how they may affect your organisation, please contact employment law expert and Head of Further Education, Tom Long.