Paying teachers for performance

Teachers in England can now be eligible for performance-related pay. Current data implies scope for bigger rewards for better teaching outcomes.

Teacher calling on student in classGiven the current fiscal outlook for the UK, we are living in an era of tighter budgets for schools. As increasing numbers of head teachers try to cope with shrinking budgets and rising pupil numbers, schools will need to make tough decisions about how best to spend limited funds. Deriving good value from the workforce is a crucial part of this. Primary schools spend 56 per cent of per pupil income on teaching staff, while secondary schools spend 60 per cent, making them the largest single item of expenditure in a school budget. So it is essential that spending on teachers delivers positive outcomes. Yet some schools appear to do this more effectively than others, achieving better value for money.

Quality of teaching is the most significant in-school influence on educational outcomes. Despite this, the quality of teaching in English schools is not always good enough. Ofsted has described the variability of teaching within schools and between schools as a ‘persistent issue’. Quality of teaching in 2 per cent (458) of schools in England is considered to be ‘inadequate’ and a further 19 per cent (4,028) of schools are rated ‘satisfactory’ (now ‘requires improvement’). Research by the independent think tank Reform suggests that these outcomes are irrespective of either the level of government funding or the current level of teacher pay.

Under the current government funding formula for schools, the relationship between the quality of teaching and per pupil funding is weak. Figure 1 shows the distribution of compensated funding per pupil at each Ofsted-graded level of teacher quality. The dashed vertical lines show the median level of funding. As the figure shows, at higher levels of per pupil government funding, there are more schools with poorer quality teaching, particularly where quality of teaching is rated as inadequate. The similarity of the distributions and the median point show that there is no real relationship between per pupil funding and quality of teaching. Schools with the highest quality teaching do not achieve it through higher levels of government funding.

Figure 1. Distribution of funding across Ofsted measure of teacher quality

Graph showing distribution of funding across Ofsted measure of teacher quality

Source: Reform calculations (outliers excluded)

This finding is reinforced by previous work. A recent Deloitte study for the Department for Education stated: ‘There is no guarantee that providing more resources to schools will improve performance’.¹ And another research paper for the Department for Education said: ‘The relationship between money and school quality has been shown to be weak, both in the general case where schools are given more money to spend as they choose and in specific cases where governments dictate how the money should be spent’.²

There is also a weak link between teacher pay and quality. We have performed an analysis of the quality of teaching at a school and the average teacher salary paid. It suggests that there is no clear relationship between the two. In Figure 2, the dashed vertical line indicates the median teacher salary for the school. It might be expected that the average salary in schools where the quality of teaching is ‘outstanding’ would be higher. However, as the figure shows, there is very little difference; a school with ‘outstanding’ teaching pays its teachers, on average, just £644 more per year than a school with ‘inadequate’ teaching (£36,827 rather than £36,183). 39 per cent of schools with poor-quality teaching have higher average salaries, on average, than the average school with teaching quality observed to be ‘outstanding’.

Figure 2. Distribution of average teacher salaries across Ofsted measure of teacher quality

Graph showing the distribution of average teacher salaries across Ofsted measure of teacher quality

Source: Reform calculations (outliers excluded)

This suggests that higher pay alone does not deliver high quality teaching. This relationship is also observed in international comparisons.³ The research findings also reflect a historical inefficiency in pay setting across schools. This is not surprising given that 40 per cent of the teaching workforce has received annual incremental pay increases under national pay agreements.

The introduction of performance-related pay in schools in England from this month is an opportunity to bring the relationship between pay and performance in schools closer together. Schools will be able to decide how best to incentivise the workforce within their existing budget, while at the same time rewarding the best teachers and encouraging weaker teachers to improve. Performance-related pay for teachers may be an effective tool to allow school leaders to deliver better outcomes, even when budgets are tight.

Further information on this subject can be found in the Reform report The Merit of Teacher Pay Reform.

Lauren Thorpe is Research and Corporate Partnership Director at Reform.

  1. Deloitte. (2012). Quality counts: What can analysis of the National Pupil Database tell us about educational outcomes?
  2. Allen, R. et al. (2012). Understanding school financial decisions. Department for Education (Report RR183).
  3. Pearson. (2012). Does money buy good teachers? Pearson: The Learning Curve.

This is a subject on which the evidence supports a range of views. We shall shortly feature a Perspectives piece from the National Union of Teachers which may put another side of this picture.


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