Circular 2020/10 - Principal Concurrence
This circular provides guidelines for boards about principal concurrence.
Date 30 November 2020 | Circular 2020/10 | Category Employment Relations
This circular is about: Concurrence to additional payments and benefits for principals in all state and state-integrated schools
This circular replaces: Circular 2013/27 issued 8 November 2013
The action needed is: to note the contents of the circular; and to 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: Contact the Employment Relations team by email: firstname.lastname@example.org
For further support: Contact your NZSTA Industrial Adviser about Human Resource issues generally
In 2013, changes were made to the principal concurrence process to increase flexibility and streamline it. This circular maintains the 2013 changes, and clarifies certain matters based on recent advice from the Office of the Controller and Auditor-General.
The main changes adopted in 2013 were that:
- concurrence can be given for a specified maximum payment over longer periods (up to three years)
- concurrence will not cease automatically upon the signing of a new collective agreement
- Boards can approve "sensitive payments" within clear boundaries, without needing to seek further concurrence
- Boards can apply before the end of Term 1 if payment is to be made from the beginning of the school year.
This circular applies to all applications for concurrence to be made for the 2021 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.
Concurrence for an additional payment or benefit
'Concurrence' is agreement by the Secretary for Education (the Secretary) to a Board making an ‘additional payment or benefit’. Additional payment or benefits is a payment additional to the base salary and allowances outlined in the principal's collective agreement or Ministry-promulgated Individual Employment Agreement (IEA) (https://www.education.govt.nz/school/people-and-employment/employment-agreements/).
The additional payment or benefit cannot be worth more than 20% of the principal's U-grade base salary.
For additional payments or benefits to be legal, a Board must request and be granted concurrence, or be paying a pre-approved sensitive payment as outlined in this circular.
Concurrence is not guaranteed. The Secretary considers each application on its merits and may seek further information before deciding.
Boards should apply for concurrence before offering the additional payment or benefit to the principal. However, a Board may start preliminary discussions with the principal.
If concurrence is granted for the additional payment or benefit to be given to a principal, Boards will usually be responsible for funding this. They must ensure they have the budget for this during the whole of the period sought and that it will not have a negative impact on the school's operation.
Duration of concurrence
Boards can gain concurrence for an additional payment or benefit for up to three years. If they wish to continue to make the payment beyond the duration sought/approved, they need to reapply for concurrence. If they do not reapply, the payment will finish at the end of the approved period.
Payments for longer than a year may be appropriate where additional responsibilities and the conditions surrounding them are ongoing and stable.
Concurrence does not expire automatically on the ratification of any new collective agreement that covers the employee or as a result of the Board election process.
Boards wishing to apply for concurrence for more than one year should make appropriate links to the annual performance review processes, for example linking to the review of agreed goals.
If concurrence is granted for more than a year, the Board is expected to review the application annually and determine whether it is justified to continue the payment for a further twelve months (or that the payment be reduced or discontinued). To avoid retrospective decisions, Boards should review their applications before the end of each year. To reduce the term or to discontinue the payment, Boards should advise Education Payroll using a NOVO2t form.
If a Board proposes to start an additional payment from the start of a school year, they are encouraged to apply for concurrence before the end of Term 1. This allows concurrence to be approved with effect from the start of the school year and allows time for Boards to consider the performance agreement and financial accountability considerations as outlined above.
If an application is received after Term 1, the decision makers will consider the application starting from the date of the Board meeting that agreed to apply for concurrence.
Retrospective concurrence is not granted.
Additional payments and benefits that may receive concurrence
Additional payments or benefits
Additional payment or benefits for duties and responsibilities that are outside the scope of a principal's normal duties and responsibilities. This can include the 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 school sites 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.
An ‘at-risk’ payment for additional duties and responsibilities can also include specific target(s), 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 after the agreed target(s) have been met.
Boards are still expected to record in the Board's minutes the reasons for the Board's agreement to a sensitive payment as this information 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 of Education (Ministry).
The Board and principal need to consider the potential tax implications of any additional payment or benefit. Boards should seek advice about the taxation implications of lump-sum payments.
Sensitive payments fall under what the Office of the Controller and Auditor-General defines as “sensitive expenditure”, which is described as 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.
The Secretary has decided that concurrence will automatically apply to Board approval for certain ‘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.
As a result, Boards are not required to seek further concurrence from the Ministry to make the three types of sensitive payments referred to above if the above requirements are met.
Where a Board is seeking concurrence for a sensitive payment, other than those already granted above, the reason for the payment must be primarily work related and give only a very small, if any, incidental private benefit. For example, the Ministry will not grant concurrence to:
- the provision of a vehicle for non-work related use
- for allowances for transport to and from work
- subsidised housing rental
- non-work related Koru Club membership
- personal grooming expenses.
In considering any sensitive payments, Boards need to be familiar with the Office of the AuditorGeneral's publication Controlling sensitive expenditure: Guide for public organisations (https://oag.parliament.nz/2020/sensitive-expenditure(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 these will be required for audit purposes.
Boards can seek further information about how to develop a sensitive expenditure policy from the Financial Information for Schools Handbook(external link). Boards may also seek guidance from NZSTA.
In determining if a payment is incidental, the Board should consider whether a reasonable person would consider there to be personal gain to the principal as a result of the proposed expenditure. In cases where the Board is unsure whether a payment meets the above requirements, advice can be sought from the NZSTA or the Ministry.
The scenarios below are provided to assist in determining what an incidental private benefit looks like regarding the use of a school vehicle.
Incidental private benefit
During the year Kiwi Park School purchased a car for use by Hamish, the school’s principal. While the car is used on school business and is accessible by others in the school, it is used primarily by Hamish. Hamish is attending a local principals’ hui. Following the hui, Hamish stops for lunch at a local bakery and collects his dry cleaning. Both the dry-cleaners and bakery are in the same block of shops, on the same road, as the location of the hui.
In this case the travel to the bakery and drycleaners arises incidentally to the work-related use. Hamish’s travel confers a private benefit because he can get lunch and pick up his dry-cleaning. However, the benefit is an incidental one.
The Board requires no further concurrence from the Ministry in this instance.
Private benefit that is not considered incidental
During the year Kiwi Park School purchased a car for school business. The vehicle may only be driven by Kiwi Park School employees or Board members. Vehicle expenses such as registration, warrant of fitness, insurance, petrol and other maintenance are paid by Kiwi Park School. The vehicle is also available for Hamish’s private use in the evenings and weekends.
In this case a reasonable person would consider that the use of the vehicle results in a personal benefit to the principal. The private benefit to the principal in this example is not considered to be incidental. The Board should establish limitations on the extent of personal use as part of its sensitive expenditure policy.
The Board may choose to include the incidental usage of assets or memberships purchased by the school in the annual delegation of powers to the principal. Alternatively, the Board may choose to approve the incidental nature resulting in the use of the school assets or membership, each time they are used. This approval should be in advance and the decision should be formally recorded in the minutes of the Board meeting.
Additional payments and benefits Boards cannot make to principals
The Ministry will not grant concurrence to an additional payment or benefit that is:
- an amount 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 salary (for example, 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)
- reimbursement for a private expense
- for activities that are not legitimate functions of a school under the Education and Training Act 2020 (such as the operation of a childcare facility).
Applying for concurrence
Any Board member, except the principal or a staff or student representative on the Board, can make the application for concurrence. However, this is usually made by the Presiding Member of the Board or if the school has a statutory manager with authority for employment and financial matters, the statutory manager must make the application for concurrence.
Boards need to ensure that confidentiality is maintained about decisions affecting the principal's remuneration.
When applying for concurrence the Board delegate must:
1. Have 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 is to show the Board’s intention that the additional payment or benefit will become a legally enforceable term of employment once concurrence (if required) has been granted.
2. Ensure that the letter of application for concurrence includes:
- specific amount (not a percentage) of the proposed additional payment or benefit
- detailed information about the nature of the additional payment or benefit, 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
3. For administrative ease, the Board may include with the application, a completed NOVO2t form and outline in their letter that the Ministry may begin payment of the
additional payment or benefit if the application is granted. This removes the need for the Board to send further notification to Education Payroll.
4. Email the application (letter and Board minute and supporting documentation if applicable) to email@example.com
5. The Board may find it helpful to use the attached Principal Concurrence Application Checklst. This does not need to be included with a concurrence application.
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 the statutory manager is making the application for concurrence, and attest that the Board can make the payment without detriment to its other activities.
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 (https://www.publicservice.govt.nz/resources/govt-expectations-pay-employment/(external link)) include the principles that organisations "be fiscally sustainable within baselines”, and “be fair to employees and to taxpayers”.
Accordingly, 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 a 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 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
- school policies such as the sensitive expenditure policy and schedule of delegations
- the school’s budget.
Where concurrence is granted
The Ministry will write to the Board confirming that concurrence has been granted or declined. The principal should be advised of this and a record kept on their personal file.
If the Board provided the completed NOVO2t with the application and gave an instruction to the Ministry to process the payment if the application is granted, this will be done on behalf of the Board.
If the Board did not provide a completed NOVO2t form with the application, it must provide Education Payroll Limited with:
- a copy of the Secretary's letter granting concurrence,; and
- information on whether the additional payment or benefit will be made with the fortnightly salary or as a lump sum (available for at risk payments only) at a specified time;
- the completed form NOVO2t Pay Details Change Form for Teaching Staff(external link)
Mark Williamson, Senior Manager Employment Relations and Pay Equity, Education Workforce, Early Learning and Student Achievement
Ministry of Education, National Office, Mātauranga House, 33 Bowen Street, Wellington 6011
PO Box 1666, Wellington 6140, New Zealand
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