Since 2010, the number of schools converting to academy status has increased year on year and this trend looks set to continue, despite the government's recent U-turn on compulsory academy conversions.

We consider some of the employment law implications for schools becoming academies.

Background

Academies are state funded schools which operate outside of local authority control, receiving their funding directly from the central government.

The chancellor announced in April's budget that all schools would be obliged to convert to academy status by 2020. However, this policy was reversed, following a backlash from the education sector.

Despite this, it remains the government's stated aim that all schools should become academies and the academy model has proved itself increasingly popular.

While 'acadamisation' remains controversial, proponents argue that the greater financial and administrative freedom enjoyed by academies, as well as flexibility over the curriculum an academy follows, gives them an ability to innovate and excel in a manner which the constraints of local authority control do not allow.

Freedom to contract: terms and conditions

Terms and conditions for staff employed in schools controlled by local authorities are agreed at a national level and subject to negotiation with trade unions. One particularly important flexibility afforded to academies is the apparent freedom to employ their staff on terms they choose to set. However, the position is not as straightforward as it may at first appear.

Schools converting to academy status will be caught by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) as the conversion will amount to a business transfer. The employment of existing employees will transfer from the local authority to the new academy trust together with their existing terms and conditions of employment, which cannot be changed post transfer (other than in very limited circumstances). Not only does this mean that an academy trust will not be able to set its own employment conditions for transferring staff, but in effect, the new employer will be bound to recognise the nationally agreed conditions of service for school teachers in England and Wales (known as the 'Burgundy Book') and, for any local authority staff transferring to the new academy, the nationally agreed conditions for local authority staff (otherwise known at the 'Green Book').

While the academy will be bound by collectively agreed terms which were in effect prior to the transfer, it will not be bound by agreed changes which take effect following the transfer date.

The academy should therefore carry out a careful due diligence exercise to scrutinise the applicable collective agreements and establish when any agreed changes are to take effect.

However, academies can break away from the terms of the Burgundy Book or other nationally agreed terms for new hires. In theory therefore, an academy can determine its own rates of pay, pay scales and pay progression for both new teaching and non-teaching staff.

This freedom is not without its difficulties. Dealing with a two-tier workforce comprising transferred employees on the one hand and new hires on the other can be problematic both in terms of the additional administrative complexity, employment relations and management.

In practice, academies will need to compete in the marketplace for new hires. As a consequence, even though they may not be bound to recognise national pay scales and other collectively agreed standards, they are likely to need to benchmark their own pay levels against the industry norms. Over time, as more and more schools convert to academies and the old collectively agreed terms start to fall away however, the marketplace is more likely to be driven by other factors such as supply, demand and geography.

Pensions

The new academy trust will also need to contend with the pension implications of transferring employees from a public authority to a new entity. Following conversion, teaching staff will continue to have access to the Teachers' Pension Scheme (TPS) and non-teaching staff who were, immediately before conversion, eligible to be members of the Local Government Pension Scheme (LGPS) will continue to have the right to participate in that scheme. The material change is, following the conversion, that rather than being under the control of the local education authority, the school (under its new academy status) will become an 'employer' within the TPS and the LGPS in its own right. This change in status makes a difference to the way employer contributions to the LGPS are assessed. Put differently, the legal and financial implications of contributing to the TPS and the LGPS (the latter in particular) are potentially complex and it follows that any school considering conversion to academy status should take advice (legal and actuarial) on the pension consequences of conversion.

Business services support

New academies are no longer automatically entitled to local authority support for functions such as payroll, HR and facilities management. While many academies choose to pay for certain local authority services, particularly in the time immediately following the conversion, academies are free to make other arrangements for the services they require. Indeed, there are likely to be services which it is impossible for the new academy trust to source from the local authority, such as legal support.

TUPE may apply to service providers, both where the academy brings a service 'in house' and where it transfers a service from one provider to another. Academies going through the conversation process should therefore be alert to the wider staffing implications of TUPE.

It may prove more efficient, particularly where several academies have grouped together, to hire essential support functions such as HR managers or bursars directly. Schools may also consider how functions such as catering, cleaning and grounds keeping are best fulfilled which is likely to involve entering into new commercial agreements with third party providers.

Collaboration

The ability of academies to group together in order to share services and resources extends to sharing staff. Particularly where academies are part of the same trust, as there is one overarching employer, it is possible for staff to be mobile across different schools allowing for much greater flexibility in resourcing.

Conclusion

Given the employment law implications of academy conversions it is not surprising that they continue to be bitterly opposed by the trade unions. However, an ever increasing number of schools are electing to make the leap to academy status and this seems unlikely to be reversed given the government's clearly stated agenda.

Bodies considering running academy schools are likely to need to take professional advice throughout and after the process to help them navigate the complex legal waters that were previously the preserve of the local authority.