Compliance with the code (6-page / 139KB PDF), which has been developed by the Committee of University Chairs (CUC), is voluntary. However, institutions that choose to adopt the code will be required to publicly explain their decisions not to comply with any of its principles.
In addition, new sector regulator the Office for Students (OfS) has indicated that it expects compliance. Chief executive Nicola Dandridge said that the OfS was expecting "all higher education providers to justify how much those who lead their organisations are paid". The OfS has been given the power to address senior pay in the absence of action by the sector.
The final code has been shortened significantly from the draft code consulted on by the CUC earlier this year. However it remains focused on the minimum standards that Institutions need to meet, according to higher education employment law expert Rob Childe of Pinsent Masons, the law firm behind Out-Law.com.
"It will be seen as a positive that the published code is a slimmed down version of the one that was originally published," he said. "However, the media, unions and student bodies will continue to shine a spotlight on senior pay and governance within the sector."
"There has already been criticism from some unions and media outlets that the code does not now go far enough to address concerns about the quality of governance on senior pay and what is seen as excessive pay in the sector. However, while the code is shorter than the draft, it does retain the core elements of fair and appropriate remuneration and does provide clearer guidance to institutions, for example on how to calculate pay multiples," he said.
The final code has been designed to ensure that senior staff at UK universities receive "a fair, appropriate and justifiable level of remuneration", awarded in a way that is transparent, accountable and procedurally fair. It is intended to apply to VCs and other senior post holders as defined by the institution's constitutional documents or governing body, as well as to senior staff at English universities as defined by the OfS in its accounts direction.
Institutions that adopt the code will be required to "publish and justify" on an annual basis the ratio of VC pay to median earnings, expressed as a multiple. They will also be required to provide an "institutional level justification" for the pay of other senior staff. The draft code suggested that VC pay outside of a range of between 4.5 and 8.5 times average salary would have to be justified. The final code has dropped this wording, and instead states that "institutions that position themselves in the highest quintile" must be prepared to explain why this is desirable.
Pay awards should take into account "the context in which the institution operates" and the value that that individual brings to the institution, according to the code. There should also be "consequences" where individuals do not deliver their expected contribution in role, for example no uplift of basic pay or participation in bonus payments. Severance pay must also be "reasonable and justifiable", according to the code.
Remuneration committees must be "independent and competent", and be comprised of people who are independent of the institution's management. A requirement that "at least one" member of the committee should have expertise in remuneration from the draft code has been replaced with a statement that committees "should be able to engage external independent expertise if required".
VCs are not permitted to sit on the remuneration committee, although they may attend meetings where their own circumstances are not being discussed. The code states that VCs should attend meetings regarding professors and other senior staff to "ensure that the committee's decisions are well informed".
The CUC intends to publish the average pay multiple, and the 'highest quintile' figure, annually, to improve transparency. These figures are currently 6.4 and 8 respectively. It also intends to commission an independent review of how the code has been implemented once the guidance has been in place for a full 12 months.
CUC chair Chris Sayers said that universities must "balance the need for recruiting the best talent with the need to demonstrate value for money".
"We are confidence the new code will promote more transparency and improve the public's understanding of and confidence in how decisions around pay are made," he said.