DfE Updates Guidance on Severance Payments for Academies: What You Need to Know

The Department for Education (DfE) has released updated guidance on severance payments for academy trusts, clarifying the approval process, reporting requirements, and expectations for demonstrating value for money.

These changes bring together financial, HR, and governance considerations — meaning academy leaders will need a joined-up approach when managing exits and settlements.

At School Business Services and across Supporting Education Group, we’ve reviewed the latest update to help you understand what’s changed and how to stay compliant.

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What's Changed in the DfE Guidance

Published in October 2025, the new Guide to Academy Trust Severance Payments sets out clearer rules on when academy trusts must seek DfE approval before making any non-statutory or non-contractual payments to employees or contractors.

Key updates include:

Stricter approval thresholds:

DfE approval is now required when:

• A non-statutory or non-contractual severance payment is £50,000 or more (gross)
• The total exit package (including contractual elements) is £100,000 or more
• The staff member involved earns £174,000 or above (gross)
• The Trust is under a Financial Notice to Improve or Notice to Improve

Mandatory HR and legal advice:

• Trusts must now obtain and document professional advice before agreeing any special severance payment, ensuring all actions comply with employment law and internal policy.

Justification and documentation:

• Decisions must clearly show why a payment is being made, how it represents value for money, and that alternatives (such as redeployment or performance management) have been considered.

Disclosure requirements:

• Even if DfE approval is not required, all non-statutory payments must be disclosed in the Trust’s financial statements and remain open to scrutiny from auditors and the DfE.

Confidentiality clauses:

• The guidance reiterates that confidentiality or non-disclosure clauses must never prevent whistleblowing or public-interest disclosure.

Why This Matters for Academy and MAT Leaders

This update signals a continued tightening of accountability across the academy sector.

Trust boards, CFOs, and HR leads will need to ensure that every severance decision is transparent, justified, and defensible, both financially and ethically.

Failure to comply could result in clawback of payments, audit findings, or regulatory action. Beyond compliance, this guidance also encourages trusts to look more strategically at workforce planning, ensuring that any restructures or exits deliver measurable value for money and support long-term sustainability.

How SBS and Sister Companies Judicium and Neo People Management Can Help

Finance & Budgeting

• Model the full cost and cash-flow implications of proposed severance payments with SBS Financial Planner.
• Ensure accurate disclosure in your financial statements and support your audit trail.
• Receive expert finance advice on demonstrating value for money and compliance with DfE thresholds.

HR & Employment Law Support

• Get dedicated HR and employment law support from specialists who work exclusively with schools and Trusts.
• Review proposed settlements, ensure employment law compliance, and prepare documentation for board or DfE approval.
• Access guidance on redundancy, consultation, and confidentiality clauses to mitigate risk.
• Receive ongoing HR partnership support to strengthen policies, manage employee relations, and prevent future issues.

Governance & Assurance

• Strengthen your internal decision-making processes with our governance and internal scrutiny teams.
• Gain templates and support for DfE approval submissions and board minutes.
• Ensure your documentation stands up to audit and regulatory review.

Together, our teams can help your Trust take a fully compliant, joined-up approach to severance payments, protecting both your people and your financial position.

Next Steps

If your trust is currently reviewing policies, considering workforce changes, or managing an exit, now is the time to check your approach aligns with the new DfE expectations.

Get in touch with our experts for support across finance, HR, and governance to make confident, compliant decisions.