How to negotiate on pay and other forms of remuneration in the independent sector, with some relevance to Further Education workplaces or academies where there is collective bargaining.

Pay is such a fundamental term of employment that the NEU believes that all members should have the right to negotiate their pay, not only to be consulted or just informed.

Meaningful consultation is based on having all the relevant information, in good time, to enable staff to ask the pertinent questions and to make informed decisions.
Meaningful negotiation is based on having the all relevant information, in good time, to enable staff representatives to discuss matters with employer representatives with the aim of reaching agreement.

It is a well-established fact that trade union membership and pay bargaining enhances pay. As Andrew Haldane, Chief Economist, Bank of England, stated in June 2017,

“...there is a clear wage premium associated with trade union membership…”

Members know from experience that interests are best served by acting collectively. Employees have the legal right to collective representation and the right to negotiate their main terms and conditions, under the Trade Union and Labour Relations (Consolidation) Act 1992, as amended by the Employment Relations Act 1999. This is known as trade union recognition.

NEU recommend that members consider seeking collective rights through the recognition of NEU. There is a separate briefing on trade union recognition.Even where members have not yet secured these collective rights, NEU recommends that members should consider submitting a pay claim. Being proactive, rather than simply waiting to be told, can have a positive effect.

Some independent schools link pay awards to the state sector, often paid at a premium. In such situations, you will be indirectly represented in the negotiations that NEU undertake with the government. If the award is in the gift of the governors, you can influence their decision!

Pay deal components

When putting your pay claim together you should consider the following aspects:

  • Cost of Living
  • Recruitment and Retention
  • Motivation and Morale
  • Performance
  • Profitability
  • Affordability
  • The Market

NEU believe that any cost of living increase below inflation, as measured by the Retail Price Index, is in effect a cut in living standards. It is not the only part of annual salary negotiations but can often be the most significant aspect.

Recruitment and retention is an important issue for any employer. Education is a people business. The key to success is recruiting and retaining high quality staff. Parents expect high quality staff and a consistency of staffing.

Ofsted in its annual report December 2014, warned of a teacher recruitment crisis over the next decade. The number of graduates entering the profession is dropping, just as pupil rolls increase. The upsurge in the economy means that more graduates now being attracted to greater reward of business and finance.

Ofsted reported that the number of new teachers has dropped by 16 per cent over the last five years, with 8,000 fewer trainees in secondary schools alone. Nearly 900,000 more school-aged children are expected over the next 10 years, with school rolls set to top eight million by 2023 – the highest number in 50 years

In a report published in September 2017, the National Audit Office reported that Secondary Schools filled only half their vacancies with teachers who had the right experience and expertise, and in about one in 10 cases, the post was not filled.

Last year saw the first annual fall in teacher numbers in state-funded English schools since 2011 (a drop of 1.2%), even as pupil numbers continued to rise.

Motivation and morale considerations affect pay offers. Regardless of the economic situation private sector employers have been historically unwilling to offer low pay awards for the fear of appearing mean. A reasonable pay deal can help foster unity and shared spirit.

Performance may also be part of the annual award when employers look to reward individual and/or collective achievement. There is an economic imperative why independent school employers should collectively remunerate staff well – the continued success of the business. Staff performance makes a school successful.

Barnaby Lenon, Chairman Independent Schools Council, in answering the question what makes a successful independent school, “Above all, it is the hard work of the talented staff…. both teaching and non-teaching staff.”

As Richard Cairns, head teacher of Brighton College, has said independent schools attract "outstanding teachers … by offering enhanced terms and conditions and smaller class sizes". "These cost money and, inevitably, this is reflected in higher fees. Any school that thinks it can stint on teachers' salaries and class sizes while still offering a first-class education is kidding itself.”

Profitability of the schoolwill determine how the employer can afford to reward staff. If the school is sufficiently profitable staff should receive at least an award to match inflation. If not they may have to accept less.

Affordability is sometimes cited by employers to deny a proper cost of living award when, more often, it is a matter of priorities. Usually,money is available but the employer would prefer to spend it on something else.

If the employer argues they can’t afford an award that matches inflation, then it is not unreasonable for NEU members to ask to see the figures. It is only very limited information that is commercially sensitive. Remember that most independent schools are registered charities, with their accounts in the public domain on the charity commission website www.charitycommission.gov.uk

The right of disclosure of relevant information is a statutory right of employees where their nominated trade union is recognised.

The market rate can also affect what is offered. This may be the local market of competitor schools, the state sector, or general private sector.

Bargaining and Total Reward

Bargaining can take the form of different forms of reward. While the headline percentage salary increase is often the most important, there are many other areas of reward and employee benefit. Examples include:

  • Flexible working
  • Improved family-friendly policies
  • Enhanced benefits such as sick or redundancy pay
  • Training provision
  • Reducing qualifying time for enhanced benefits

For example, NEU reps in one HMC school negotiated a cost of living increase that matched the Retail Price Index, as well as a significant enhancement of maternity provision from the bare statutory minimum.

Pay Claims other than simple percentage increases

Another approach to collective bargaining is to combine percentage increases with minimum lump sums. This can benefit the low paid because a percentage figure increase can often be very low. NEU reps should bear in mind members on low wages such as cleaners and caterers. Several independent sector employers have recognised this issue and awarded minimum lump sums to lower paid staff.

Employers offering unconsolidated lump sums

One more recent development has been employers offering unconsolidated lump sums, to save money. If a payment is unconsolidated it is paid on a one-off basis and not added to your basic pay for future pay increases or pension contributions.

The Living Wage

NEU Section recommends that members consider including the request that the employer pays the Living Wage. This can make a significant difference to our lowest paid members, often catering and cleaning staff.

The Living Wage seeks to ensure that people have enough money to live on. It is calculated according to the basic cost of living in the UK. An hourly rate is set independently and updated annually in November. From November 2017, the rate is £10.20 per hour in London and £8.75 in the rest of the UK.

Low pay is a problem in all sectors but the contrast in the independent sector can be stark with members being paid less than half the annual school fees.

ATL reps successfully negotiated the first Living Wage agreement in the independent sector. All staff employed in the 24 independent schools run by the Girls Day School Trust are paid the Living Wage as a minimum. GDST is now an accredited Living Wage employer. This collective agreement extends to external contractors should any school provision be contracted-out.

The Living Wage enjoys cross party support. Many companies are convinced that showing their employees that they value them and treating them fairly, has benefits not only to the workforce, but to the company itself.

National Minimum Wage and the new “National Living Wage”

In April 2016, the Government introduced a new statutory minimum the National Living Wage for all working people aged 25 and over.

From April 2018, the NLW rate is £7.83 per hour for those aged 25 years or more. For employees aged between 21 and 24, the NLW rate is £7.38.

Cost of living as measured by the Retail Price Index (RPI)

Inflation, as measured by the RPI, stood at 3.2% in July 2018. It has now been above 3% since February 2017.

NEU believe that the most relevant inflation indicator is the Retail Price Index.  RPI was introduced in 1947 by the government to assist employers and employees in negotiations over salary increases to reflect rising costs. It has been the traditional measure of inflation used by employees and employers.

More recently, since 2003, the government haschampioned the Consumer Price Index as its preferred measure of inflation, arguing it is more easily comparable index internationally. However, CPI is generally lower, as amongst other things, it omits housing costs which is clearly a significant cost factor in the UK.

CPI inflation was 2.5% in July 2018, up from 2.4% in June.

Though, it is telling that the government uses RPI for its own purposes for index-linked securities, index-linked gilts, non-means tested benefits, tax allowances and social housing rent increases. Another example is train fare increases where the government has used the formula of the July RPI figure. Student loan interest rates are also linked to RPI.

RPI and CPI are updated monthly by the Office for National Statistics.

Short-term RPI Inflation forecasts (based on average predictions of independent forecasters)

 

2018

2019

 

Jul

Oct

Jan

Apr

XpertHR (RPI)

3.4

3.3

3.2

3.1

OBR (RPI)

3.8

3.5

3.3

3.1

Bank of England (CPI)

2.5

2.3

2.3

2.3

OBR (CPI)

2.5

2.4

2.1

1.9

Over the longer term, RPI inflation is forecast to remain around 3% until at least 2022, according to the OBR.

Long-term inflation forecasts (OBR)

 

2018

2019

2020

2021

2022

RPI

3.7%

3.0%

2.9%

2.9%

3.0%

CPI

2.4%

1.8%

1.9%

2.0%

2.0%

The effect of the economic downturn on pay negotiations

Successive annual Pay & Conditions Surveys have confirmed that some independent schools are suffering in the fall-out of the economic down-turn. However, the clear majority are not, with many independent schools prospering.

The 2018 Independent Schools Council (ISC) Census reported an overall growth in pupil numbers to 529,164.  The ISC report that pupil numbers now stand at their highest level since records began in 1974.

If the school is doing well staff should be rewarded with a cost of living award that at least matches inflation. Otherwise staff living standards fall in real terms.

Playing catch-up

A factor to bear in mind in any negotiations is that there may be an element of catch-up when previous increases were below inflation. From our last pay survey in October 2017 of 1,300 NEU members, we know that the majority received an annual increase of less than the increase in the Retail Price Index.

TUC analysis shows that between 2007 and 2015 UK wages fell by 10.4% – a drop equalled only by Greece. How can we seek redress? Submit a pay claim!

Increased pension costs

Over three years from 2012 to 2014 the Government phased in an increase to the contribution rate for the Teachers' Pension Scheme (TPS) from 6.4 per cent to an average of 9.6 per cent. This has impacted on teachers’ standard of living. There is an argument that these increased costs should be considered in any pay claim.

Benchmarking against the state sector

State sector teachers will receive a 3.5% increase from September 2018 applied to the minimum and maximum of the main pay range and unqualified teacher range; a 2% increase applied to the minimum and maximum of the upper range, leading practitioner range and all allowances; and a 1.5% increase applied to the minimum and maximum of the leadership pay ranges.

Most school support staff received a 2% increase in April 2018, with a further 2% increase agreed for April 2019. Some lower-paid staff receive a larger underpinning increase as part of a restructure of the pay scale, with increases worth up to 16% over the two years on the lowest rates of pay.

The indices of a financially healthy independent school

To collective bargain effectively, you need to know the general financial position of your employer. It is not uncommon for members to be told that the employer cannot afford a higher increase. However, often, it is a case of priorities: they would prefer to spend the money on something else! If you have the actual figures it is easier to challenge such assertions.

So how can you tell how well your employer is doing? Well, there are several pointers as to the health of an independent school. There is no absolute guide as every situation is different. To avoid drawing conclusions from minor variances, it is advisable to look at trends, so request information over a period, say, five years.

Total income & expenditure

The biggest item on a school’s budget is staffing costs. The ISC estimates that the average independent school spends approximately 65-70% of income on salaries. If your school spends significantly less, there might be money available.

Pupil numbers

Pupil numbers rising is a healthy sign. A dip in numbers may not mean that the school cannot afford a cost of living award as lean years should be offset with fat.

A more sophisticated measure is to look at pupil and staffing numbers, as a fall in pupil numbers might be been offset by a fall in staff numbers.

Income derived from school fees

For a considerable number of years, the average increase in school fees has comfortably outstripped wage increases and RPI. The ISC census 2018, reports the average increase in school fees between 2017 and 2018 was 3.4%.

Synchronising your pay claim with the financial cycle of the school

NEU members should be looking to submit a pay claim around February for the following September to maximise the chance of influencing the budget.

The school financial year follows the academic year. Budgeting for the following year begins to take shape around February. With entrance exams in January and offers in February, the school will get a sense of numbers by the beginning of March. The first draft of the budget is considered by the finance committee which usually meets towards the end of February/beginning of March. The budget will then go to main board before Easter.

Parents must give a term’s notice to remove a pupil. The quid pro quo is that the school gives a term’s notice of fee increase, published at Easter. This is either a set amount or a guide, e.g. that the increase won’t be more than x%.

If collective bargaining is conducted later, there is still scope for negotiation, as it is likely that a prudent budget will have been set. This will include provision for a pay increase, and contingencies to allow for variables or unforeseen expense. General budget heads will often be set providing further room for manoeuvre.

Salaries have around 30% on-costs. This is composed of National Insurance Contributions of 13.8% and pension 16.48% [TPS]. So, a cost of living increase of say, 3%, equates to an increase of 3.9% for the school budget.

Salary budget for each school will vary. One factor is the age of the staff. There is a correlation between the age of the pupils and the age of the staff. This will be reflected in the wage bill with the pre-prep having the lowest and the senior the highest salary cost per capita.

Come September the school will know pupil numbers will be known and make any necessary adjustment to the budget. In the autumn term, the bursar will obtain estimates for refurbishment, catering, insurance, utilities etc.

Other sources of finance apart from fees

Some schools have sources of income other than fees. There is a growing trend in the sector to employ “development officers” to source all avenues of income from parents to alumni, local business etc. Endowments for certain schools make a big difference but investment income has dropped during the recent downturn.

Some schools have large trading departments with a turn over as high as £40 million. Old attractive boarding schools will be in demand for weddings, film sets etc. Summer schools and after school clubs earn additional money, and in some schools, extra income for staff. Trivial trading includes the school shop, letting the astro turf pitches, swimming pool etc., giving an income of say £50-70,000, which in a budget of seven million is welcome but not significant.

Reserves & Surplus

The Independent School Bursars Association recommends that a term's money is held in reserve. Many schools have much less. The ISBA recommends that a school aims to run at an annual 10% surplus, though, again, this is far from universal.

Organising checklist

  • Does your school have a pay policy? Does it need improving?
  • What structures are there in place to deal with pay? Is there a pay and reward committee? If so, how effective is it?
  • Is there negotiation? Is it conducted in a timely fashion so staff can influence the budget making process?
  • Do you have negotiating rights? If not, consider recognition of NEU.
  • Does the employer provide enough information to enable staff representatives to make informed decisions?
  • What is the strength of staff feeling?
  • Are there other pay related issues, such cover policy for teachers or time off in lieu/overtime for additional hours worked by part-time staff?
  • How strong is the NEU voice? Can you act together with other unions?
  • Identify leverage. What can you do to influence the employer?
  • What is the best way to involve colleagues?
  • Consider setting up a NEU rep email group to exchange information with colleagues in local or comparable schools.
  • Look to strengthen staff voice by recruiting more colleagues into NEU.

Trade Union Recognition

If your employer does not negotiate salary increases, or refuses to provide relevant information for meaningful consultation, then consider securing trade union recognition. Recognition is a statutory right, providing a majority are in favour. NEU can support members with advice and practical assistance.

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