Are schools being misled on the funding for the teacher pay rise?

The Government’s latest announcement on teacher pay has been presented as a solution to concerns about how schools will fund the 3.5% teacher pay award for 2026/27. However, while the announcement has been welcomed by the NEU as a significant step towards fully funding the award, many school leaders and trust executives have questioned whether anything has genuinely changed.

From an HR perspective, the key issue is not just whether the pay award is affordable nationally, but whether individual schools and trusts have the financial capacity to implement it without creating additional workforce pressures elsewhere.

The Government's position is that schools can fund the pay rise through a combination of the previously announced £700 million of additional funding and savings generated by lower employer contributions to the Local Government Pension Scheme (LGPS), which applies to support staff rather than teachers. Employer contribution rates within the LGPS have fallen significantly following the latest actuarial valuations, reducing costs for many schools and trusts.

However, many sector leaders argue that these pension savings are not new money. Schools have known about the reduction in LGPS contributions for some time and many have already reflected those savings within their 2026/27 budget planning. As a result, some leaders view the announcement as confirmation of an existing financial position rather than the delivery of additional funding.

For HR professionals and school leaders, the practical impact is likely to vary considerably. The reduction in LGPS costs differs significantly between pension funds and individual employers. Some trusts will benefit from substantial savings, while others may see only limited reductions. This means that although the teacher pay award may be deemed "fully funded" at a national level, the reality for individual organisations could look very different.

Where pension savings do not fully offset pay costs, schools may still need to identify efficiencies elsewhere. This can create difficult workforce planning decisions around vacancies, recruitment, restructuring, use of temporary staff, non-staffing expenditure and future growth plans. HR teams may therefore find themselves increasingly involved in discussions around workforce affordability and organisational design.

There is also a potential employee relations dimension. The announcement may reduce the likelihood of industrial action if teaching unions are satisfied that the pay award is now fully funded. However, if schools subsequently need to implement cost-saving measures to balance budgets, there may still be concerns from employees and trade unions about workload, staffing levels and service delivery.

Importantly, the announcement does not affect employees' pension benefits. The reduction relates solely to employer contribution rates within the LGPS and reflects the improved funding position of pension funds. Support staff pension entitlements remain unchanged.

For trusts and schools, the key HR message is that while the national funding debate may be moving towards a conclusion, local affordability remains a significant consideration. Organisations should review the actual impact of their pension contribution changes, model the cost of the teacher pay award across their workforce and assess any longer-term implications for workforce planning, recruitment and employee relations.

As is often the case in education funding, the headline announcement tells only part of the story. The real challenge for many schools will be determining whether the funding works in practice within their own budgets.