School staffing considerations: cost-saving steps

Independent schools are increasingly under pressure in what is, for many schools, a challenging economic climate. More specifically, schools’ finances are being impacted by the introduction of VAT on school fees, as well as staffing costs which have recently risen with the increase to employer NICs. Our Schools Advisor, Mary Breen, and our employment lawyers have been working with a number of schools who are reviewing their staffing models and assessing whether there are costs which may be saved without compromising on quality and service. This briefing considers what some of those steps might look like:

1. Reducing headcount: employee costs are the highest expense for a school, and it can be tempting to reduce headcount to save money. While this can often be effective, it needs careful planning, not least in terms of managing staff morale and the perception amongst the wider school community (and especially the parents) that the school is not doing well if it is making cuts. It can also be costly, both financially and in terms of time, and is not without legal risk. Managing what would likely be a redundancy process requires following specific steps to avoid unfair dismissal claims.
2. Rationalising class sizes: moving from, for example, four small forms to three larger forms will lead to a reduction in the headcount of teachers. Again, this needs careful planning – not least from a legal perspective but also in terms of managing how such steps are perceived among the wider school community, particularly where the school has promoted small class sizes to prospective and current parents.
3. Restricting recruitment: a recruitment freeze can be a cost-effective approach to saving staff costs and carries fewer legal risks than making redundancies. However, it may not give schools the quick-fix solution that reducing headcount could. That said, it is often a sensible first step when looking to rationalise a staff body or a particular part of it.
4. Covering from within: schools can look at their existing staff to see whether there is capacity to cover for staff absence through illness or family leave. When schools might, in the past, have automatically reached for an agency or advertised for temporary cover, covering from within can have the effect of mopping up any spare capacity and, of course, avoids the temporary cover costs.
5. Reduce non-employed staff: Where certain staff are not employees of the school (such as agency staff or self-employed contractors) and the school takes steps to reduce their headcount, this can be a quick-fix way of reducing staffing costs. This is legally lower risk than terminating employees (who may have protection from unfair dismissal), as non-employees are unlikely to have the same rights. However, it is important to verify the employment status of individuals before making termination decisions to ensure that the individual is not an employee. Care should also be taken to ensure there are no potential discrimination or whistleblowing risks.
6. Mergers: although not limited to the staff body, a merger can result in significant cost-savings for schools, particularly by rationalising back-office functions such as finance/HR and compliance. We recently wrote about the typical school merger transaction structure and key stages involved (see last year’s briefing here). In recent years, mergers have become an important cost-saving measure, and, in some cases, a vital step for a school’s survival. From an employment perspective, a merger will usually involve the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) which plays a key role in protecting employees’ rights. For example, the new employer (or dominant school in the merger) cannot make employees redundant just because they were transferred from another employer (the less dominant school in the merger) and the new employer cannot change an employee’s terms and conditions if the reason is the transfer itself.
7. Outsourcings: just as we have seen in the corporate world, schools are now increasingly thinking about outsourcing services such as food, security and maintenance. This can result in lower costs and can, in some cases, improve the provision.
8. Restructuring the SMT: this needs careful planning and sensitive consideration, particularly where the restructure might impact long standing members of the SMT. A detailed plan or business case is advisable as this will help the school to identify any risk areas and the steps in the process which will need to be taken. Restructuring a team can be a helpful way of streamlining staff into, or out of, key roles.
9. Flexible staffing solutions: Hiring part-time or temporary staff during peak periods can help manage costs, and allows schools to adjust staffing levels based on demand, ensuring that resources are used efficiently.
10. In-house offering: Offering in-house training and development programs can be more cost-effective than sending staff to external courses. By leveraging the expertise of existing staff to deliver training and mentoring/coaching, schools can save money and tailor professional development to their specific needs.
11. The Teachers’ Pension Scheme: given the increases to the employer pension contribution rate (now at 28.68%), we have seen many schools taking steps to withdraw from the TPS.
12. Lay-offs and short-time working: although less commonly used as cost-saving measures, if the employment contract allows for such steps, they can be a potential way to save costs. Again, how these approaches might be received by the school community would need to be carefully considered, given such steps are usually seen as a last resort for employers and are likely to cause consternation among the staff body.

Conclusion

Cost-saving measures present both opportunities and challenges, and there are, of course, other steps schools can take to save costs beyond the examples set out in this briefing. By carefully considering the employment law implications and taking proactive steps to manage such steps, schools can achieve cost savings that ultimately benefit both staff and students.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2025