eBASE, effective basic services:Performance Pay

Performance Pay

Low impact for moderate cost based on very limited evidence
Implementation cost
Evidence strength
Impact (months)

Performance pay schemes aim to create a direct link between teacher pay and the performance of their class in order to incentivise better teaching and so improve pupil 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 in a particular school year.

Approaches also 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. Some performance schemes incentivise individuals, others incentivise groups of teachers.

1. The impact of performance pay is low (+1 month), schools might consider other, more cost effective, ways to improve teacher performance, such as high quality continuing professional development.

2. Given the lack of evidence that performance pay significantly improves the quality of teaching, resources may be better targeted at developing existing teachers.

3. Implementing performance related pay can narrow the focus of teachers to particular groups or particular measures, so care should be taken to try and minimise undesirable effects.

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 low (+1 months’ progress). The use of loss aversion – where awards have to be paid back if student results fall below a certain level – are less widespread in many education systems, but where these approaches have been trialled evaluations have found some larger impacts.

There is some evidence that impact may also be greater in developing countries. 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 improved pupil learning outcomes.

There are some concerns that performance pay schemes can create unintended consequences. For example, that they may encourage teachers to focus only on tested outcomes, leading to a narrowing of the curriculum, or to focus on groups of pupils near a particular assessment threshold.

A related approach that has shown promise is using bonuses or enhanced pay to attract teachers to challenging schools.

Overall, approaches which simply assume that incentives will make teachers work more effectively are not well supported by existing evidence.

The evidence on performance pay from low and middle-income countries is mixed. Nevertheless, findings lean towards positive outcomes from performance pay schemes.

In Sub-Saharan Africa (SSA), the evidence suggests significant positive outcomes from performance pay programs. However, the research evidence emanates mostly from east Africa. Bonuses not contingent on performance have not been found to improve student outcomes.

  • Overall there is little difference in the impact by age group taught.

  • Effects are typically similar for literacy and mathematics.

There are several different approaches to performance pay including bonuses, loss aversion and enhanced pay. Key elements of performance pay approaches might include:

  • A clear and transparent pay policy with financial incentives to motivate teachers or retain high-quality staff.
  • Accurate assessments of pupil progress, attainment, and barriers to achievement.
    Monitoring of schemes to assess impact on pupil groups, the curriculum and teacher motivation.
  • A wider culture of support and teacher professional development.

It is crucial that strategies that reward teacher performance also include support for teachers to develop and careful strategies to mitigate the risk of focusing only on the measures used to distribute performance related pay.

The assessment of two of the programs within SSA reported that they were cost effective, although program costs were not listed in the studies. In Tanzania, research has shown that rewarding teachers based on achievement within the multiple threshold system could be effective. Similar findings have also been found in Kenya, whereby contracting teachers on a third of the standard pay with renewal or tenure contingent on performance proved cost effective. In other LMICs, many studies also reported the intervention as cost effective, compared with regular practice.

Implementation of incentive schemes will however, require a little more resources than current practice. Costs may therefore be moderate.

Alongside cost, school leaders should consider how to retain high-quality teaching staff through a strong culture of professional support and development. School leaders should carefully monitor the impact of performance pay approaches and avoid schemes that can lead to unintended consequences, such as a greater attention on specific pupil groups closer to assessment thresholds at the detriment to other students.

The security of the evidence around performance is rated as very low. 27 studies were identified that meet the inclusion criteria for the Toolkit. The topic lost padlocks because:

  • A large percentage of the studies are not randomised controlled trials. While other study designs still give important information about effectiveness of approaches, there is a risk that results are influenced by unknown factors that are not part of the intervention.
  • There is a large amount of unexplained variation between the results included in the topic. All reviews contain some variation in results, which is why it is important to look behind the average. Unexplained variation (or heterogeneity) reduces our certainty in the results in ways that we have been unable to test by looking at how context, methodology or approach is influencing impact. 

The local evidence on the effectiveness of performance pay is limited. While studies are experimental, involving some randomized trials (RCTs), these have been conducted in East Africa with starkly different educational and school governance systems to central and west Africa. This difference between educational contexts casts doubt on the generalizability of the results across the rest of SSA, particularly in the Lake Chad Basin, and reiterates the need for more RCTs.

As with any evidence review, the Toolkit summarises the average impact of approaches when researched in academic studies. It is important to consider your context and apply your professional judgement when implementing an approach in your setting.

Evidence strength
Number of studies27
Review last updatedJuly 2021