Performance pay

Performance pay schemes create a direct link between a teacher’s wages or bonus, and the performance of their class. 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. A second key issue is how performance is measured and how closely this is 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?

Estimates based on cross-national comparisons suggest that performance pay could lead to positive impacts of around three months. However, the results of more rigorous evaluations, such as those with experimental trials or with well-controlled groups, suggest that the actual average impact has been close to zero. In India, there is evidence of the benefit of performance pay in the private sector but not the state sector, but it is not clear how this evidence applies to other systems.

As the 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 student learning outcomes, investing in performance pay would not appear to be a good investment without further study. There are a number of examples of unintended consequences of performance pay from the US and elsewhere, which suggests that designing effective performance pay schemes is difficult.

Evaluations of the English threshold assessment introduced in 2000 offer a cautious endorsement of approaches which seek to reward teachers in order to benefit disadvantaged students by recognising teachers' professional skills and expertise. However, approaches which simply assume that incentives will make teachers work harder do not appear to be well supported by existing evidence.

How secure is the evidence?

The evidence is not conclusive. Although there has been extensive research into performance pay, most of this is either from correlational studies linking national pay levels with general national attainment or from naturally occurring experiments. In the latter it is hard to measure other variables which may influence the impact of pay increases, such as teaching to the test or other forms of “gaming”. Overall, it is hard to make causal claims about the efficacy of performance pay on the basis of existing evidence.

For full references and effect sizes, please click here.

What are the costs?

Increases are usually of the order of £2,500 per teacher or £100 per pupil across a class of 25. Overall cost estimates are therefore low.

What should I consider?

Before you implement this strategy in your learning environment, consider the following:

  1. It is clearly important to recruit the most effective teachers possible, and any additional resource may be better targeted at identifying and appointing the best teachers for a school.

  2. Performance pay has been tried on a number of occasions, however the evidence of impact on student learning does not support the approach.

  3. Spending on professional development linked to evaluation of better learning by pupils may also offer an alternative to performance pay.

  4. Performance pay may lead to a narrower focus on test performance and restrict other aspects of learning.