Circular 2013/27 - Principal Concurrence

Industrial Relations circular about concurrence for additional payments and benefits for principals.

Date 8 November 2013 | Number 2013/27 | Category Industrial Relations

Overview

This circular is about concurrence to additional payments and benefits for principals in all state and state-integrated schools.

This circular replaces the advice about principal concurrence in Circular 2011/02.

The action needed is to note the contents of the circular. Apply the requirements below when applying for concurrence to additional payments and benefits for principals.

It is intended for boards of trustees ("Boards") of all state and state-integrated schools.

For more information email the Industrial Relations Unit, employment.relations@education.govt.nz.

For support contact your NZ School Trustees Association Industrial Adviser about Human Resource issues generally.

Introduction

Changes have been made to the principal concurrence process to increase flexibility and create a more streamlined approach.

The main changes are:

  • to enable concurrence to be given to a specified maximum payment over longer periods (up to three years instead of the current annual concurrence)
  • concurrence will not cease automatically upon the signing of a new collective agreement
  • to enable Boards to approve “sensitive payments” within clear boundaries, without needing to seek further concurrence 
  • to enable Boards to apply before the end of Term 1 if payment is to be made from the beginning of the school year.

Concurrence for an additional payment or benefit

An ‘additional payment or benefit’ is additional to the base salary and allowances in a principal’s collective agreement or Ministry-promulgated Individual Employment Agreement (IEA).

Employment agreements

A Board must apply for concurrence for an additional payment or benefit for additional duties and responsibilities before offering it to the principal, subject to the requirements of this circular. This does not preclude preliminary discussions between the Board and principal.

‘Concurrence’ means the Secretary for Education’s (the Secretary) agreement to the Board making the additional payment or benefit. Any additional payment or benefit, unless it is a pre-approved sensitive payment of the type specifically outlined in this circular, is not lawful or legally binding without such concurrence.

Once concurrence is given to an additional payment or benefit for the principal, Boards are usually responsible for providing the additional payment or benefit from their own funding. They must ensure they have the budget for this and that it will not have a negative impact on the school’s operation.

This circular applies to all applications for concurrence to be made for the 2014 school year onwards. It replaces all previous guidance about concurrence, and sets out:

  • general rules concerning concurrence
  • types of additional payments or benefits that may get concurrence
  • what Boards need to consider before applying for concurrence
  • how to apply for concurrence
  • what happens when concurrence is granted or declined
  • guidance and resources Boards may find helpful. 

Rules concerning concurrence

Concurrence is not guaranteed. The Secretary considers each application on its merits and may seek further information before making a decision.

The additional payment or benefit cannot be worth more than 20% of the principal’s U-grade base salary.

Duration of concurrence

Concurrence can be given for a maximum period of three years. If a Board wishes to continue making the payment after three years, it must reapply for concurrence. If no new application is made the payment will cease at the end of the period.

A period longer than one year may be appropriate where additional responsibilities and the conditions surrounding them are ongoing and stable.

Where concurrence is given for a period longer than one year the Board is expected to review the situation annually and make a decision as to whether the circumstances still justify the payment being continued for a further period of twelve months (or that the payment be reduced or discontinued). This annual review should be carried out before the end of the year to avoid retrospective decisions. If the Board, after review, decides to either reduce the term of the concurrence or reduce / cease the payment the Board must advise Novopay on a NOVO2t form.

Boards wishing to apply for concurrence for an additional payment or benefit for more than one year should make appropriate links with the annual performance review processes (for example, the ongoing review of agreed goals when the Board develops the annual performance agreement with the principal).

Concurrence will not expire automatically on the ratification of any new collective agreement that covers that employee nor will it expire as a result of the Board election process.

Except as provided below, retrospective concurrence is not granted.

Boards are encouraged to apply for concurrence before the end of Term 1 of the year in which payment is sought if it is proposed that payment is to be made from the beginning of the school year. Within that timeframe, concurrence can be approved with effect from the beginning of the school year (i.e. 28 January). This is to allow time for the performance agreement and financial accountability considerations set out above.

Additional payments and benefits that may receive concurrence

Boards can apply for concurrence to additional payments or benefits for:

  • duties and responsibilities that are outside the scope of a principal’s normal duties and responsibilities
  • sensitive payments1  that fall outside the pre-approval list set out below and which are not specified within the non-exhaustive examples of private expenses that the Ministry will not give concurrence to (footnote 4 refers).  

Additional duties and responsibilities

Additional duties and responsibilities can include, for example, management of and responsibility for:

  • achieving and maintaining such high levels of practice that the school is considered an exemplar of practice, resulting in other schools seeking information and advice on how to achieve and maintain this practice
  • functions that occur across a number of schools or for additional units.  Examples may include: Alternative Education Units and Teen Parent Units
  • a residential/boarding hostel owned by the Board
  • implementing a significant change process (noting this is likely to be temporary (such as a substantial building programme) or transitional (such as establishing a new school cluster or networking arrangement)

a significant initiative that earns extra revenue for the school and is in addition to the principal’s normal role. An example of this may be large intakes of international fee paying students.

In these cases, if concurrence is granted, the additional payment or benefit is made as part of the principal’s fortnightly salary, unless the “at risk” provisions below apply.

At risk payment

Additional duties and responsibilities can also include specific target(s), such as the principal recruiting a certain number of international fee-paying students.2

These are called ‘at-risk’ payments as the principal needs to achieve an agreed target to receive the payment. In these cases, if concurrence is granted, the additional payment is paid as a lump sum at a time agreed by the Board and the principal, after the agreed targets have been met.

Sensitive payments

The Secretary gives prior concurrence to Board approval for ‘sensitive payments’ to a principal in the cases set out below:

  • Koru Club membership
  • home phone and internet rental
  • limited use of a school vehicle for private purposes where the vehicle is primarily required for work purposes;

where in the Board’s judgment:

  • the benefit is work related and has a clear work benefit, and
  • the principal will get only a very small or incidental private benefit, and
  • the benefit is in accordance with the Board’s sensitive expenditure policy.

From the date of this circular, Boards require no further concurrence from the Ministry to make the three sensitive payments referred to above to principals if the above requirements are met. In considering any sensitive payments Boards need to be familiar with the Office of the Auditor-General’s publication Controlling sensitive expenditure: Guidelines for public entities (external link) .

Boards are still expected to record in the Board’s minutes the reasons for the Board’s agreement to a sensitive payment as it will be required for audit purposes.

In cases where the Board is unsure whether a payment meets the above requirements advice can be sought from the New Zealand School Trustees Association (NZSTA) or the Ministry.

The Board and principal need to consider the potential tax implications of any additional payment or benefit.

Additional payments or benefits Boards cannot make to principals

The Ministry will not grant concurrence to an additional payment or benefit that is:

  • worth more than 20% of a principal’s U-Grade base salary
  • for recruitment or retention purposes
  • a performance or incentive payment (that does not meet the description of an “at risk” payment above)
  • for duties that are within the scope of normal duties and responsibilities
  • for something that is already compensated or provided for in the principal’s salary3
  • reimbursement for a private expense4
  • for activities that are not legitimate functions of a school under the Education Act 1989 (such as the operation of a childcare facility).

Financial accountability

In all their activities, Boards have an obligation to: record payments in the school’s annual accounts; ensure prudent financial management and appropriate financial decision making; and be financially accountable as the users of public funds.

The basic principles that govern the use of all public funds are: accountability, openness, value for money, lawfulness, fairness, and integrity.

The Government’s Expectations for Pay and Employment Conditions in the State Sector (external link)  include the principles that organisations “be fiscally sustainable within baselines”, and “be fair to employees and to taxpayers”.

Therefore, when considering an additional payment or benefit, Boards must be satisfied and able to show that:

  • the payment or benefit will further the aims of the school
  • the Board could justify the payment or benefit to a taxpayer or parent
  • the school will not be at risk of negative publicity over the payment or benefit
  • in the case of sensitive payments, there will be no, or very small, personal benefit for the principal – either actual or perceived
  • the payment or benefit represents the best value for money
  • the Board has the budget to make the additional payment or benefit.

Boards need to be very clear on the tax implications (such as Fringe Benefit Tax) and the employment implications of any additional payment or benefit. Boards should contact the Inland Revenue Department with questions about tax implications.

Board plans and policies

Boards should refer to the following documents to make sure the additional payment or benefit fits with and is supported by the Board policies and plans:

  • the school’s Charter and annual plan
  • the principal’s annual performance agreement
  • the Board’s Annual Report
  • policies such as the sensitive expenditure policy and schedule of delegations
  • the school budget.

Applying for concurrence

A person delegated by the Board, usually the Board chair, makes the application for concurrence.5  If not the Board chair, the delegate can be any member of the Board except the principal (or a staff or student representative on the Board). 

Boards need to ensure that confidentiality is maintained about decisions affecting the principal’s remuneration. 

When applying for concurrence the Board delegate must:

1. Ensure that the Board has agreed, and recorded in the Board minutes, that it wishes to make an additional payment or benefit to the principal and the reasons for it. This will show that the additional payment or benefit is intended to become a legally enforceable term of employment once approval (if required) has been given.  

2. Ensure that any application for concurrence includes:

  • a letter of application signed by the Board delegate
  • the nature of and specific amount of the proposed additional payment or benefit
  • detailed information, including supporting documents where appropriate, explaining the reasons for the proposed additional payment or benefit; for example, outlining the principal’s additional duties and responsibilities
  • the proposed date of payment, if it is intended that the payment shall be an at risk lump sum paid on a specified date
  • a copy of the Board resolutions concerning the additional payment or benefit (see Board Resolutions section below).

3. The Board may include with the application a completed NOVO2t form and a statement in the letter that the Ministry may begin payment of the additional payment or benefit if the application is granted. If concurrence is provided the Board will not have to then send in a letter to its payroll centre because the payment of the additional payment or benefit will instead be processed by the Ministry as soon as the application is accepted. A letter will still be sent to the Board informing it of the outcome of the application. The principal should be advised of this and a record kept on their personal file.

4. To assist in ensuring all steps have been undertaken when applying for concurrence, the Board may find it helpful to use the attached Principal Concurrence Application Checklist. It is not intended that Boards include this with applications but they may if they wish.

5. Send the application (marked confidential) to:
Industrial Relations Unit, Ministry of Education
PO Box 1666, Wellington
or, you may prefer to scan and email it to: employment.relations@education.govt.nz.

Board resolutions

The Board resolutions included with every application must:

  • approve the concurrence request and the reasons for the request
  • confirm that any concurrence sought and received for a period longer than twelve months will be subject to an annual review by the Board as to whether the circumstances still justify the payment being continued for a further period of twelve months (or that the payment be reduced or discontinued). The review should be carried out within the year to avoid retrospective decisions
  • delegate the authority to a Board member/s to make an application for concurrence
  • acknowledge that the Board accepts the liability for the additional payment or benefit and has the financial capacity to make the payment without detriment to its other activities
  • confirm that the Board intends to make the additional payment or benefit from Board funds for Board of Trustee business (rather than from Board of proprietor or trust funds).

If a statutory manager is making the application
The application must confirm that that the statutory manager is making the application for concurrence, and attest that the Board can make the payment without detriment to its other activities.

Where concurrence is granted

The Ministry will write to the Board confirming that concurrence has been granted or declined.

If the Board provided the completed NOVO2t with the application and gave an instruction to the Ministry to process payment if the application is granted, this will be done on behalf of the Board. The Board will be provided a letter informing them that the application was successful and that payment will begin.

If the Board did not provide a completed NOVO2t form with the application it must provide the Novopay Service Centre with:

Issued by

Nick Kyrke-Smith, Acting Senior Manager Industrial Relations, Education Workforce, Student Achievement 
Ministry of Education, National Office, 45–47 Pipitea Street, Thorndon, P O Box 1666, Wellington, New Zealand
Tel 04-463 8000, Fax 04-463 8001, Email employment.relations@education.govt.nz

Footnotes:

  1. Sensitive payments fall under what the Office of the Auditor-General defines as “sensitive expenditure”, i.e. expenditure by a public entity that provides, has the potential to provide, or has the perceived potential to provide a private benefit to an individual staff member of a public entity that is additional to the business benefit to the entity of the expenditure. It also includes expenditure by a public entity that could be considered unusual for the entity’s purpose and/or functions.
  2. Boards should seek advice about the taxation implications of lump-sum payments.  See Appendix A (see download).
  3. For example, the Ministry will not grant concurrence for a payment to recognise the decile or U-grade of a school, or compensate for a reduction in salary due to change in decile or U-grade, as these are already compensated for in the principal’s salary.
  4. As indicated in ‘sensitive payments’, these must be primarily work related and give only a very small, if any, private benefit.  For example, the Ministry will not grant concurrence to: provision of a vehicle for non-work related use, for allowances for transport to and from work, insurances, subsidised housing rental, non-work related Koru Club membership, or personal grooming expenses.
  5. If the school has a statutory manager with authority for employment and financial matters, the statutory manager must make the application for concurrence.

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