Chapter 3.4: Financial management relating to employees

3.4.1 Funding, Staffing and Allowances Handbook

The Ministry of Education produces the Funding, Staffing and Allowances Handbook that includes information on school staffing, payments to individuals and Education Service Payroll.

There are a range of processes that schools must adhere to and records relating to their employees that schools must keep in good order.

3.4.2 Banking staffing

Since 2001, schools have been allowed flexibility to manage their staffing, eg, they can employ teachers over their allocated staffing entitlement or save up any unused staffing entitlement.

Schools can save (bank) staffing for use later in the year. They can also anticipate staffing up to a limit of 10 percent of their annual entitlement and pay this back by under-using their staffing entitlement later in the year.

Schools are provided with a banking staffing report fortnightly. Under or over usage of banking staffing as at 27 January (PP22) each year can be corrected up to and including PP26 (end of March) of that year. Any remaining overuse at PP26 is deducted from the operations grant funding payment on 1 July.

Note: PP means pay period

Refer to Chapter 4.51 - Banking Staffing overuse.

3.4.3 Severance Payments

The principles of good employment practice are:

• a fair and transparent recruitment and appointment process
• a clear and comprehensive employment agreement – with express provisions regarding termination and redundancy
• regular reviews of performance against measurable benchmarks
• a clear and well-documented process for resolving disputes.

An employment relationship should be managed in such a way that a dispute does not escalate to the point where termination of the relationship appears to be the only feasible option.  However, in some exceptional circumstances a fair and cost-effective means of terminating the employment relationship may need to be sought. 

It is vital that the board contact their insurance company as soon as there is any indication of a dispute.  The board should also immediately contact the industrial relations section of the New Zealand School Trustees Association for advice.

Disputes settlement is the heart of employment law and practice.  Some settlements are inevitable.  What is important is that they are:

• made for the right reasons
• structured appropriately
• as transparent as possible.

When facing a possible severance payment it is expected that, as an employer in the public sector, a board will:

• seek and obtain specialist advice (in writing) before reaching a severance agreement
• use a fair, sound, documented process leading up to the severance agreement
• ensure the terms of the severance agreement are fair, reasonable, transparent, and properly authorised
• keep its stakeholders appropriately informed throughout the process taking into account the nature of the stakeholders’ interest and the need to protect other interests (such as privacy of employees).
• ensure that severance payment is processed through the payroll system.

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In May 2002, the Controller and Auditor-General reported on Severance Payments in the Public Sector and identified the following six key principles that should underlie a public sector employer’s approach to resolving employment disputes:

1. Minimise the potential for terminating employment
Any dispute with an employee arises in the context of an employment relationship.  A good employer should manage the relationship in such a way as to minimise the potential for an emerging dispute to develop into one where termination of the employment becomes the only feasible option for either party.

2. Reach a soundly based decision to settle
If termination of employment becomes the only feasible option for resolving a dispute, a public sector employer’s decision to settle (rather than pursue a dismissal and/or defend a personal grievance raised by the employee) should be one which is:

• properly authorised
• based on specialist advice that assesses all options for resolving the dispute and appreciates the wider public sector dimension
• reasonable and appropriate – having regard to the interests of the organisation and the wider public interest.

3. Observe appropriate standards of probity and integrity
When negotiating an employment settlement, a public sector employer should conduct itself in a manner that reflects appropriate standards of probity and integrity.

4. Ensure that terms of settlement are appropriate
A public sector employer that enters an employment settlement should ensure that the terms of the settlement are consistent with:

• the employer’s contractual obligations to the employee, and
• the employee’s legal entitlement to, and acceptable levels of payment for, tax-free compensation.This can only occur if ordered by the Employment Relations Authority.

5. Preserve maximum transparency
A public sector employer should ensure that any confidentiality agreement reached as part of an employment settlement:

• is genuinely necessary, and in the interests of both parties
• is consistent with the employer’s obligations regarding disclosure of information
• does not otherwise prevent the employer from being accountable for its use of public funds.

6. Avoid exposure to public or political embarrassment
A public sector employer should not expose an external stakeholder to public or political embarrassment in relation to an employment settlement by failing to:

• address political or public interest risk, or
• keep the stakeholder adequately informed.

Severance payments to trustees

The Education Act (section 78NA) states that no trustee is entitled to any compensation or other payment or benefit relating to his or her ceasing to hold office as a trustee. 

This section of the Act clarifies the government’s previously announced expectation that government departments and Crown entities are not to provide ‘golden handshakes’ to members as they leave office.