Education Matters: What to expect in the new academic year?

In light of the current economic environment, it is anticipated that we are likely to see more schools and academies considering voluntary collaborative mergers.

If you are thinking about a merger, whilst the benefits for your pupils should always be the central focus, it is also important to consider the pros and cons.
Pros may include: 

• Improving education standards 
• Financial benefits, such as economies of scale 
• Boosting staff and student welfare 
• Improving infrastructure 

Cons may include: 

• Being disruptive and timely 
• Raising anxieties and objections 
• Creating incompatibilities and culture clashes 
• Leading to reductions in staff 

Merger Due Diligence 

Due diligence will help you to understand the organisation that you are thinking about merging with. 

There are five main areas to be investigated:  

1. Educational performance 
2. Legal and regulatory compliance 
3. Organisational areas 
4. Finance 
5. Commercial 

The key to a successful due diligence process is to think about it early on. It should be an ongoing process that is started as soon as possible and updated regularly. It can be a lengthy and time-consuming process with numerous complexities depending on which issues arise.  

There is no set process to due diligence. For an effective process you will need to consider: 

• Your approach – Will you appoint a project manager or team to deal with due diligence? 
• Legal support – Will you obtain guidance from legal advisers and at what point?  
• Confidentiality agreements – Remember that before sharing any confidential information you should ensure that appropriate confidentiality agreements are in place. 
• Sharing findings – Plan at an early stage when and to whom you need to report information to. 
• Thorough research – Physically visit the school(s) that you might merge with – this is not just a paper exercise. 
• A project plan – Plan and agree milestones and reporting deadlines. 

Once completed there will usually be a public law duty to consult with stakeholders, this should be at a formative stage and concluded before any final decision is taken. 

The due diligence process is important not only to establish relevant information, but should it go poorly, it can be damaging to the school’s reputation and leave schools vulnerable to successful claims which may lead to awards of compensation. 

Changes to Part 2 of the statutory guidance: Keeping Children Safe in Education (KCSIE)– 1 September 2022 emphasises the key roles of trustees and governors in relation to safeguarding and that they need to hold school leaders to account. Safeguarding training and on-line training should take place on induction and be kept updated. Further, all governors should read the Designated Safeguarding Lead (DSL) job description and understand and be able to question safeguarding. Ensure that your school gives careful consideration to these matters including how this is documented. Part 3 now encourages online searches to be carried out on new candidates. It is unclear exactly what should be involved or to what extent you should undertake such checks. The safest approach is to ensure that checks only relate to suitability to work with children and are no wider than necessary. To minimise potential risks to your school, consider: 

• Making clear in job adverts that suitability to work with children checks will be undertaken online; 
• Creating a matrix with parameters for searches and record what is searched. This will assist you to demonstrate that each candidate is being treated equally. 

This is not a new issue for the education sector but Covid-19 has not helped, particularly with evidence of damage to staff wellbeing, loss of confidence and unmanageable workloads. Excessive workloads are considered to be a driving force behind the downturn in teacher wellbeing. A recent Tes Survey has confirmed that 67% of 3,000 teachers said their workload has become unmanageable and only 38% of school staff felt confident in their roles. 

To attract and retain staff, schools will need to consider the wellbeing of their staff by reviewing strategies and reducing workloads. Take a look at the DfE school workload reduction toolkit for assistance.  

Please see our article on Harpur Trust v Brazel – how this case will affect employment practices in schools – Brachers for an update on this case. Following the decision of the Supreme Court 1 July 2022, it is clear that basing holiday pay on an average calculation of 12.07% is no longer correct and, if not already done so, schools must now correct how they are calculating holiday pay. 

It is also advisable to consider your approach and strategy to potential claims arising from this decision. 

Many schools are looking at bringing services such as catering back in house, rather than outsourcing to a contractor. This is likely to be a service provision change, and schools need to ensure they are aware of the legal implications of this. Whether a service provision change triggers the Transfer of Undertakings (Protection of Employment) Regulations 2006 or TUPE as it is more commonly known, is a matter of fact and legal analysis based on the specific circumstances. 

If TUPE does apply there are key considerations, and a strict legal process should be followed around the appointment of representatives and information and consultation for affected employees. 

This is important as failure to adhere can result in an award of up to 13 weeks’ uncapped gross pay per affected employee. Additionally, employee liability information (ELI) must be provided from the current employer to the future employer. Failure to comply can result in compensation to be awarded of a minimum of £500 per employee. 

Practical steps that could be taken include considering splitting liability within commercial contracts and considering structures and approaches to minimise the application of TUPE.  

The changes to the Education and Skills Funding Agency (ESFA) handbook (Effective from 1 September 2022) are minimal, key matters include: 

• Financial requirements – The requirement for the academies budget forecast return outturn (BFRO) to be submitted annually has been removed. 
• Related parties – Transactions where a ‘religious designation’ not just ‘diocese’ is now deemed at cost. 
• Delegated authorities – Clarification that only ‘special’ severance payments more than £100,000 and/or employee earning more than £150,000 require ESFA approval; no ESFA approval is required for having indemnities in the ‘normal course of business’; and indemnity is where one party compensates a loss to the other due to their actions (normal indemnity examples include a catering contract, energy contract or data sharing agreement). 

The recent white paper refers to ‘strong trusts’. The issue is that there is currently no definition of what a strong trust is or looks like. There are references to governance and financial strength, but there is nothing definitive. It is unknown at this point how the RSC will assess each trust. Strong governance could relate to strong clerking and active trustees, whereas weak governance could be shown through high trustee resignations and lack of succession planning. 

Financial strength could be assessed by looking at both internal and external audit findings and reports. It could also potentially be linked to ratios, such as cost per pupil, income per pupil and pupil to teacher ratios. However, none of this is concrete or confirmed. 

It is possible that audit firms may locate problematic areas in the upcoming months. Due to time pressure and the cost-of-living crisis, added pressure is being applied to schools for balancing budgets. Additionally, rising costs has led to supplier price increases and schools may struggle to obtain quotes purely because suppliers are too busy to provide them. In amongst the struggles, the concept of value for money can become lost. When striving to do the right thing, organisations can prioritise improved quality of education standards over value for money. 

An example of this would be allowing an employee who suffered a stressful premature birth to come back onto full time pay whilst remaining on extended maternity leave. Although it may be the moral thing to do, it will have a knock-on effect on value for money which would mean children may have to go without school supplies and adequate teaching. There is also a danger that it may set a precedent for payments going forward.

The government has set targets that are a few years away, but there are ongoing climate change issues happening now, so question is this something that needs addressing now?There are additional pressures on trusts and schools due to increasing energy prices. These high costs are driving change and habits, for example not turning your heating on this winter. Similar habits could be applied to a school scenario. Although there are costly changes that could be implemented, such as solar panels and LED lights, there are smaller and more manageable alternatives.

This could be as simple as ensuring printers are set to print double-sided, which would also financially benefit the school due to the increasing cost of paper. Additionally, encouraging walking buses and staff carpooling could also reduce the carbon footprint.