This paper examines and summarises research into performance-related pay. It was undertaken as part of the Teachers' Incentive Pay Project, currently in progress at the University of Exeter, which is a study of the introduction of threshold assessment and performance management for teachers in schools in England and Wales. The paper examines research into the effects of pay on employees' behaviour and considers the claimed benefits and disadvantages of performance-related pay, both generally and with particular reference to the teaching profession. Proponents of performancerelated pay claim that it improves the motivation of employees and assists in the recruitment and retention of high quality staff. Disadvantages include neglect of unrewarded tasks; disagreement about goals; competitiveness; lack of openness about failings; cost and the possibility of demotivating those who are not rewarded. Performance-related pay has long been a feature of teachers' remuneration in the US, where it has usually been promoted in response to national crises perceived to be rooted in educational failure. Traditionally, most US merit pay schemes for teachers have not been long-lasting. This paper considers research into a variety of US schemes, including studies of the conditions under which they are found to succeed. Performance-related pay works best in situations in which there are easily measured outcomes, such as in manufacturing, but the outcomes of teaching are many and varied and there have been problems related to measuring teachers' effectiveness. The paper reports claims by Odden (2000) that measuring teachers' performance is now more feasible and that, therefore, the time is right for the introduction of performance-related pay for teachers.Key Words: performance-related pay, teachers, incentive, threshold assessment.2 Performance-related pay and the teaching profession: A review of the literature "I cannot promise the House that this system will be an economical one and I cannot promise that it will be an efficient one, but I can promise that it shall be one or the other. If it is not cheap it shall be efficient; if it is not efficient it shall be cheap." (Bourne and MacArthur 1970 p.20) With these words, performance-related pay for teachers in England was introduced to the House of Commons in 1861. The plan, which, it was thought, would cut the growing cost of education if teachers did not succeed or raise standards if they did, was the idea of a commission into the state of popular education in England (The Newcastle Commission). It proposed "to institute a searching examination….of every child in every school…and to make the prospects and position of the teacher dependent, to a considerable extent, on the results of the examination." (Bourne and MacArthur 1970 p.20) The notorious 'payment by results' system lasted for thirty years, during which time teachers taught to the test, were confined to a narrow, boring curriculum, attempted to arrange the school intake, cheated, ignored bright children and...

This is the first of two papers describing a study of the introduction of performance-related pay into the teaching profession in the United Kingdom. It reports the views and experiences of a national random sample of 1,000 primary and secondary head teachers in over 150 local education authorities in England who were responsible for implementing one strand of the government's performance-related pay scheme, Threshold Assessment. The second paper describes the views and experiences of teachers who were unsuccessful in crossing the threshold and therefore did not obtain a pay increment.Head teachers did not find it difficult to assess the five standards that teachers had to meet in order to receive their £2,000 additional performance payment, but they were very critical of the training they received, the amount of time they had to spend, and the changing ground rules. The success rate was 86% of all teachers eligible, but 97% of those who actually applied were awarded the additional payment.Most heads dealt with the applications entirely on their own, though one in six, mainly in the secondary sector, shared the task with senior colleagues. Unsuccessful candidates were few in number, but most were deemed to be failing on more than one aspect of their teaching. While those who were successful in crossing the threshold were pleased and relieved, unsuccessful applicants were said to be bitter, threatening action, in several cases leaving the school.External Threshold Assessors had to visit every school. In only 71 cases out of 19,183 applicants in our sample of schools was there disagreement. Three quarters of heads felt Threshold Assessment had made a little or no difference to what teachers did in the classroom. This is confirmed by our other 3 studies, which suggest that teachers simply keep more careful records, rather than change how they teach. Some 60% of heads were opposed to performance-related pay, but 39% were in favour of it in principle, though most of these were unhappy about the way it had been put into practice.

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