Performance pay

Low impact for low cost, based on limited evidence.

What is it?

Performance pay schemes aim to create a direct link between teacher pay or bonuses, and the performance of their class in order to incentivise better teaching and so improve outcomes. A distinction can be drawn between awards, where improved performance leads to a higher permanent salary, and payment by results, where teachers get a bonus for higher test scores. Approaches differ in how performance is measured and how closely those measures are linked to outcomes for learners. In some schemes, students’ test outcomes are the sole factor used to determine performance pay awards. In others, performance judgements can also include information from lesson observations or feedback from pupils, or be left to the discretion of the headteacher.

How effective is it?

The results of rigorous evaluations, such as those with experimental trials or with well-controlled groups, suggest that the average impact of performance pay schemes has been just above zero. Some approaches appear to show more promise, such as bonuses or enhanced pay to attract teachers to challenging schools, or loss aversion, where the award has to be paid back if student results fall below a certain level.

Overall, evaluations of a number of performance pay schemes in the USA, where the approach is also known as ‘merit pay’, have been unable to find a clear link with pupil learning outcomes.

There are some concerns that performance pay schemes can create unintended consequences. For example, that they may encourage teaching to the test or focusing only on tested outcomes and a narrowing of the curriculum.

How secure is the evidence?

The evidence is not conclusive. Although there has been extensive research into performance pay, much of this is either from correlational studies linking national pay levels with general national attainment or from naturally occurring experiments. More recent randomised trials have had mixed results. Overall, it is hard to make causal claims about the efficacy of performance pay on the basis of the existing evidence.

What are the costs?

In the US, in one study, transfer incentive payments were $20,000 and retention bonuses $10,000, both over two years (approximately £7,600 and £3,800 per year respectively). Similar sums of between $15,000 and $5,000 have been awarded in merit pay schemes.

What should I consider?

High quality teaching is essential for improving outcomes.

Given the lack of evidence that performance pay significantly improves the quality of teaching, resources may be better targeted at identifying and recruiting high quality teachers.

High quality continuing professional development (CPD) may be a more cost effective way to improving teacher quality. Schools should look for CPD products that have been shown by independent studies to improve pupil outcomes.

Performance pay may lead to a narrower focus on the measures used to assess teacher performance. How will you ensure this does not adversely affect other aspects of learning?

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