Circular 2011/02 - Principal concurrence

Date 21 January 2011 | Number 2011/02 | 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 circulars 2008/01, 2008/03 and 2008/04.

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 of all state and state-integrated schools.

For more information email the Industrial Relations Unit, industrial.relations@minedu.govt.nz.
All agreements are available on this website.

Introduction

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).

There are two types of additional payments or benefits:

• payments or benefits for additional duties and responsibilities
• ‘sensitive payments’¹ such as home phone rental (stricter criteria apply to these).

A board of trustees must apply for concurrence for an additional payment or benefit before offering it to the principal.

‘Concurrence’ means the Ministry agrees to the board making the additional payment or benefit. Any additional payment or benefit is not lawful or legally binding without such concurrence.

Once concurrence is granted, boards of trustees are responsible for providing the additional payment or benefit from their own funding. They must ensure they have the budget for this, and that it won’t have a negative impact on the school’s operation.

This circular applies to all applications for concurrence made after 21 January 2011. 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
• advice and resources boards may find helpful.

Rules concerning concurrence

Boards must always apply for concurrence to any additional payment or benefit before committing to its payment (eg, concurrence should be applied for before varying the principals’ employment agreement, and any discussion about the payment or benefit such make it clear that the offer is subject to concurrence being approved).

Concurrence is not guaranteed. The Ministry considers each application on its merits.

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

Duration of concurrence

Concurrence is only given for a maximum of one school year. If a board wishes to continue making the payment after one year, it must reapply for concurrence.

All existing concurrence to additional payments or benefits expires on the date of ratification of any new collective agreement that covers that employee.

Retrospective concurrence is not granted. The Ministry will only consider applications for future concurrence.

Additional payments and benefits that may get 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, and
• for ‘sensitive payments’ such as home phone rental, where the phone is used primarily for work purposes.

Additional duties and responsibilities

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

• a residential/boarding hostel owned by the board of trustees
• recruitment and responsibility of large intakes of foreign fee paying students
• a significant initiative that earns extra revenue for the school and is in addition to the principal’s normal role
• 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
• implementing a significant change process.

In these cases, if concurrence is granted, the additional payment or benefit is made as part of the principal’s fortnightly salary.

At risk payment

Additional duties and responsibilities can also include a specific target that results in a financial return to the school, such as the principal recruiting a certain number of international fee-paying students.

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.²

Sensitive payments

Boards can make ‘sensitive payments’ to a principal for things like Koru Club membership for school business-related travel, home phone rental, or the personal use of a school vehicle.

The board must be satisfied and be able to show that:

• the benefit (eg, Koru Club Membership, home phone rental) is work related and has a clear work benefit, and
• the principal will get only a very small or incidental private 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 base salary
• for recruitment or retention purposes
• a performance or incentive payment (that does not fit the description of an ‘at risk payment’ described 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).

Before applying for concurrence

Boards should always seek advice from organisations such as the New Zealand School Trustees Association (NZSTA) and the Ministry of Education.

In particular, 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.

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; 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 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 bad publicity over the payment or benefit
• there will be no, or very small, personal gain 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.

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 board policies and plans:

• the school’s Charter
• the board’s Annual Report
• policies such as the sensitive expenditure policy and schedule of delegations
• the school budget.

The Appendix to this circular lists the advice and resources available to boards.

Applying for concurrence

A board delegate, 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.

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.
2. Record the agreed additional payment or benefit, and the reasons for it, in preparation for it to become a variation to the principal’s employment agreement (if concurrence is granted). This will show that the additional payment or benefit is intended to become a legally enforceable term of employment.
3. Ensure the application includes:
   • a letter of application signed by the board delegate
   • the specific amount of the additional payment or benefit
   • detailed information, including supporting documents where appropriate, explaining the reasons for the additional payment or benefit – for example, outlining the principal’s additional duties and responsibilities
   • information on how the additional payment or benefit will be made and the reason, if it is intended that the payment shall be an at risk lump sum paid on a specified date,
   • a copy of the checklist attached to this circular, signed by the board delegate
   • a copy of the board resolutions concerning the additional payment or benefit (see below).
   Note: the application must also include additional information (outlined below), if:
• the application is for concurrence to a sensitive payment
• the application is for concurrence to a payment or benefit to be made from board funds, rather than board of proprietor or trust funds
• the school is under statutory management.
4. Send the application to:
   Industrial Relations Unit, Ministry of Education
   PO Box 1666, Wellington

Board resolutions

The board resolutions included with every application must:

• approve the concurrence request and the reasons for the request
• delegate the authority to a board member/s to make an application for concurrence
• acknowledge that the board accepts the liability for the remuneration or benefit and has the financial capacity to make the payment without detriment to its other activities.

If the application is for a sensitive payment

The application must also include:

• a statement that the primary purpose of the sensitive payment is appropriate and work related
• a statement that the sensitive payment has a clear operational benefit
• the board’s sensitive expenditure policy, or reference to another policy in support of the application.

If the payment or benefit will be made from board funds

The application must also include a statement 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 statutory manager must complete the relevant part of the ‘Checklist for principal concurrence application’. This confirms that the statutory manager is making the application for concurrence, and attests that the board can make the payment without detriment to its other activities.

When concurrence is granted or declined

The Ministry will consider each application on its merits.

In some cases, the Ministry will ask for further information before making a decision.

Concurrence is granted

The Ministry will write to the board confirming that concurrence has been granted.

The board must then provide its payroll centre:

• a copy of the letter granting concurrence, and
• information on whether the additional payment or benefit will be made with the fortnightly salary or as a lump sum at a specified time, and
• the completed form ESP2t Pay Details Change Form for Teaching Staff. This form is available on the School Payroll website.

Concurrence is declined

The Ministry will write to the board stating that concurrence has been declined, and setting out the reasons.

In some cases, the Ministry may invite the board to re-apply at a later date.

Issued by

Sarah Borrell, Industrial Relations Manager
Education Workforce, Schooling Group, Ministry of Education
National Office, 45 – 47 Pipitea Street, Thorndon
P O Box 1666, Wellington, New Zealand
Phone 04-463 8000, Fax 04-463 8159, Email industrial.relations@minedu.govt.nz 

Appendix: advice and resources

1. For advice on employment matters from the New Zealand School Trustees Association (NZSTA):
   www.nzsta.org.nz/board-as-employers
   www.nzsta.org.nz/nzsta-services/industrial-and-personnel-advisors
2. For the Ministry of Education’s Financial Information for Schools Handbook:
   www.minedu.govt.nz/finance
   This handbook includes guidance on:
• Model School financial policies (particularly Kiwi Park Sensitive Expenditure Policy and Kiwi Park Schedule of Delegations).
• Accounting for locally raised donations and fundraising and other income.
• Information for boards of integrated schools.
3. For National Administration Guideline (NAG) 4:
   www.minedu.govt.nz/NAGs
   NAG 4 requires a board of trustees to: allocate funds to reflect the school’s priorities as stated in its Charter; monitor and control school expenditure; and ensure that annual accounts are prepared and audited as required by the Public Finance Act 1989 and the Education Act 1989.
4. For reimbursement and expenses clauses in the relevant collective agreement:⁶
   www.minedu.govt.nz/employmentagreements 
5. For tax guides, including Fringe Benefit Tax guidance:
   www.ird.govt.nz
6. For the Government’s Expectations for Pay and Employment Conditions in the State Sector:
   http://www.ssc.govt.nz
7. For The Office of the Auditor General’s publication Controlling sensitive expenditure: Guidelines for public entities:
   http://www.oag.govt.nz/2007/sensitive-expenditure.

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.

³ For example, the Ministry will not grant concurrence to a payment to recognize 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 stated in ‘Sensitive payments’, these must be primarily work related and give only 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.

⁶ Clause 3.3 of the Secondary Principals’ Collective Agreement and Area School Principals’ Collective Agreement, and clause 6.1 of the Primary Principals’ Collective Agreement.