Performance Pay

2011 Retaining Effective Teachers Policy

2011 Goals for Performance Pay

The state should support performance pay but in a manner that recognizes its appropriate uses and limitations.

Best practices

An increasing number of states are supporting performance pay initiatives. Florida and Indiana are particularly noteworthy for their efforts to build performance into the salary schedule.  Rather than award bonuses, teachers' salaries will be based in part on their performance in the classroom. 

Best practice 2

States

Meets goal 14

States

Nearly meets goal 1

State

Meets goal in part 6

States

Meets a small part of goal 1

State

Does not meet goal 27

States

How we graded

Performance pay is an important recruitment and retention strategy.

Performance pay provides an opportunity to reward those teachers who consistently achieve positive results from their students. The traditional salary schedule used by districts pays all teachers with the same inputs (i.e., experience and degree status) the same amount regardless of outcomes. Not only is following a mandated schedule inconsistent with most other professions, it may also deter talented individuals from considering a teaching career, as well as high-achieving teachers from staying in the field, because it offers no opportunity for financial reward for success.

States should set guidelines for districts to ensure that plans are fair and sound.

Performance pay plans are not easy to implement well. There are numerous examples of both state and district initiatives that have been undone by poor planning and administration. The methodology that allows for the measurement of teachers' contributions to student achievement is still developing, and evaluation systems based on teacher performance are new in many states. Performance pay programs must recognize these limitations. There are also inherent issues of fairness that should be considered when different types of data must be used to assess the performance of different kinds of teachers.

States can play an important role in supporting performance pay by setting guidelines (whether for a state-level program or for districts' own initiatives) that recognize the challenges in implementing a program well. Because this is an area in which there is still much to learn about best practice, states should consider piloting local initiatives as a way to expand the use of and knowledge base around performance pay.

Research rationale

Research on merit pay in 28 industrialized countries from Harvard's Program on Education Policy and Governance found that students in countries with merit pay policies in place were performing at a level approximately one year's worth of schooling higher on international math and science tests than students in countries without such policies (2011). 

Erik Hanushek found that a teacher one standard deviation above the mean effectiveness annually generates $400,000 in student future earnings for a class size of 20. See Hanushek, Erik A. "The Economic Value of Higher Teacher Quality," National Bureau of Economic Research, Working Paper 16606 (December 2010).

In addition, numerous conference papers published by the National Center on Performance Incentives reinforce the need to recognize the limitations and appropriate uses of performance pay. See: http://www.performanceincentives.org/.

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