Shortly before the end of last term, the Department for Education (DfE) published its 2026 edition of the Academy Trust Handbook, which provides an overarching framework for financial governance, management and other controls for academy trusts in England.
Effective from 1 October 2026, it introduces tighter controls on how trusts manage staff exits and settlement agreements, covered between paragraphs 5.7 and 5.14.
Every trustee, accounting officer, senior leader, HR professional and finance manager needs to understand what has changed – and why it matters.
What is a special staff severance payment?
If your trust ever offers a departing employee anything beyond what they are legally entitled to under statute or their contract – for example through a settlement agreement – you are dealing with a special staff severance payment (SSSP).
Payments that fall into this category include:
- Payments made under a settlement agreement that exceed contractual or statutory entitlements
- Garden leave where there is no contractual right to garden leave
- Compensation in lieu of notice (CILON) where there is no contractual right to pay in lieu of notice
SSSPs are not compensation payments or ex gratia payments. They are a distinct category under the Handbook – and the 2026 edition has tightened the rules around them.
What has changed in the 2026 Handbook?
1. A hard 50% legal threshold
The 2025 Handbook said that settlement might be justified where there was “a significant prospect of losing the case”. This language was vague. The 2026 Handbook replaces it with a clear numerical rule.
Get a formal legal assessment before making any offer. If it shows your trust has a greater than 50% chance of losing at employment tribunal, a settlement may be justified – especially where defence costs would be high. If it shows your trust has at least a 50% chance of winning, you should not offer a settlement.
Crucially, you can’t settle simply because it is cheaper than running a disciplinary process. Cost alone is not a lawful justification.
2. SSSPs are now explicitly ‘exceptional’
The 2026 Handbook introduces new language at paragraph 5.12, framing the SSSP regime as applying only ‘additionally, and exceptionally, if an academy trust is considering a staff severance payment above statutory or contractual entitlements’.
The word ‘exceptionally’ is deliberate. SSSPs are not routine people management tools.
If your trust has been using settlement agreements as a matter of course to manage exits, you need to change that practice now in accordance with the DfE’s special severance payments guidance and HM Treasury’s public sector exit payments guidance on special severance payments.
3. More situations require prior DfE approval
This is the most significant practical change for HR and finance teams, which must obtain DfE approval before making any SSSP where:
- The total exit package is £100,000 or above and includes an SSSP
- The employee earns over £174,000
- The payment is ‘novel, contentious or repercussive’ (NCR)
The NCR category is broader than many trusts realise. Pay close attention to the following examples, which are explicitly cross-referenced in the Handbook:
- Cases likely to be contentious or attract public attention, including those involving a senior member of staff.
- Any agreed exit where the employee is leaving outside a formal conduct, capability, retirement, redundancy or voluntary exit scheme process.
That last point has significant practical implications. Agreed exits reached without a formal internal process – precisely the scenario most often managed through a settlement agreement – are likely to be NCR. This means prior DfE approval is required before any offer is made.
4. Confidentiality clauses always require DfE approval
In respect of special severance payments, confidentiality clauses are always novel, contentious or repercussive, and so must not be used unless the trust has obtained prior DfE approval. There are no exceptions.
5. Payments under £50,000 are not exempt
Where an SSSP includes a non-statutory or non-contractual element of £50,000 or more (gross), DfE prior approval is mandatory. But the £50,000 figure is not a safe harbour.
A payment below that threshold that is NCR – for example, an agreed exit outside a formal process – still requires prior DfE approval. Apply the same level of scrutiny to smaller payments as you would to larger ones, and document your value for money assessment in every case.
6. Record-keeping is now mandatory
This requirement is entirely new. You must clearly record and retain evidence of:
- The management and approval process for any SSSP
- The legal advice received, including the assessed percentage likelihood of successfully defending the claim
- The reasons for the decision
- The supporting evidence
- How value for money was ensured
Informal conversations and undocumented assessments are no longer enough. A contemporaneous paper trail is now a requirement under the Handbook.
The personal risk for accounting officers
This is not just an institutional compliance matter. The accounting officer must take personal responsibility – which can’t be delegated – for assuring the board that the trust is complying with the funding agreement and the Handbook.
Each year, the accounting officer must sign a statement on regularity, propriety and compliance, and submit it to the DfE alongside the audited accounts. A non-compliant SSSP is a personal risk to the individual who signs it off.
The message is straightforward: agree the process, seek approval and document everything before making any offer, whether verbal or in writing. Agreeing heads of terms first and seeking approval afterwards is not permissible.
What to do before 1 October 2026
Ensure trustees, accounting officers, HR leads and finance managers are across these changes before the new Handbook takes effect. Before any SSSP or settlement agreement is contemplated, your trust should:
- Obtain a formal written legal assessment of the prospects of defending any employment claim, expressed as a percentage.
- Treat the proposed settlement as NCR and seek DfE approval before making any offer — including informal or verbal ones — where the trust’s prospects of success are 50% or greater.
- Check whether any other NCR trigger applies: in particular, whether the exit is likely to attract attention and whether it is an agreed termination outside a formal process.
- Obtain DfE approval before including any confidentiality clause.
- Document the decision-making process, including legal advice, reasons, and value for money assessment, and retain that documentation.
- Apply the same level of scrutiny to payments below £50,000 as to those above the threshold.
Sarah Linden is a legal director specialising in education employment law at UK and Ireland law firm Browne Jacobson.
