New limits on academy trust senior pay and future pay rises

Amended Academy Trust Handbook guidance will apply from 1 October 2026.

As the end of the Summer term approached, and before the recent sweeping changes to the Labour Government, the Department for Education announced some key pay-related changes with short term and longer-term impacts on academy trusts.

Alongside announcing teachers’ pay rises to take effect over the next two school years, the DfE stated that academy trust executive salaries over a cap of £174,000 will require prior DfE approval. The stated aim is to bring academy trusts into line with other parts of the public sector, including the NHS and colleges.

The announcement also stated that annual pay increases for academy trust executives must be tied in future to teacher’s pay rises.

Updated Academy Trust Handbook sets out further detail

The draft Academy Trust Handbook for 2026 was subsequently published on 15 July, and it is clear that the restrictions are more wide-ranging than suggested in the initial DfE announcement. The new version of the Academy Trust Handbook comes into effect on 1 October 2026.

The change means that academy trusts will need to seek DfE approval before advertising any role with:

• a full-time equivalent salary of over £174,000; and/or

• performance-related pay of over £25,000.

This applies to any senior role where the above criteria are met, and is not limited to CEOs or other executive roles.

In addition, executive pay rises must not exceed pay rises awarded to the academy trust’s teachers, unless this is clearly justified, in which case the academy trust must seek approval in advance from the DfE. This applies to any pay rise awarded on or after 1 October 2026.

These new requirements are set out in the Main Financial Requirements section (Part 2) of the Academy Trust Handbook 2026.  The draft updated handbook can be viewed at: Academy trust handbook 2026: effective from 1 October 2026 - GOV.UK.

Next steps for academy trusts

Academy trust leaders should now:

• Review whether any planned senior / executive posts to be advertised in the new school year may fall within the approval requirement;

• Consider seeking approval from the DfE for a proposed salary, performance-related pay element or pay rise in excess of the set caps – ideally preparing a justification document and seeking approval well before the recruitment process or pay review is set to commence;

• Consider how the new approach will interact with existing pay policy and whether there is a need to review pay policy, following the normal processes for reviewing and amending employment-related policies;

• Identify whether employment contracts contain wording which runs counter to the guidance on annual pay increases;

• Consider whether longer notice periods for senior roles would assist with future recruitment processes where DfE approval may need to be sought;

• Seek legal advice on making changes to contractual documents where needed; and

• Ensure communications with relevant senior staff are carefully managed, making clear that:

  • salaries for existing roles are not impacted by the new guidance;

  • the new guidance on pay increases will be taken into account in pay reviews from 1 October 2026 onwards.

These changes continue the recent focus on academy trust executive pay but represents a change in approach, exercising greater central control on academy trust pay decisions by imposing a default salary cap set around the level of the prime minister’s salary.  

There may of course be circumstances where setting salary at a higher level is justifiable, and academy trusts should consider applying for prior DfE approval in such cases at an early stage. This change will impact immediately on upcoming recruitment timelines. It is difficult to predict how long it will take for DfE approval to be considered, or whether it will be forthcoming.  

Academy trusts are increasingly looking to recruit executives with experience outside the education sector and this change could impact longer-term on the ability of academy trusts to recruit and retain experienced executive and senior leaders who can attract more competitive remuneration elsewhere.

Academy trust leaders should note the legal risk of imposing changes to employment contracts and contractual policies without reaching agreement with the employee, and following collective consultation and negotiation processes with the relevant recognised trade unions where relevant.

Conflicts of interest for executive leaders will also need to be borne in mind as the Academy Trust Handbook is clear that no individual can be involved in deciding their own remuneration. We recommend that advice is taken on this issue by the academy trust board or relevant committee from legal advisors specialising in employment law within the education context.

If you would like to discuss any aspect of this article further, please contact our Education team on 0113 244 6100.

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice, please feel free to contact Wrigleys Solicitors.