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Performance Related Pay in Public Sector: Exploring Known Unknowns

Delve into the impact, effectiveness, and value of Performance Related Pay (PRP) in the public sector. Explore the characteristics of a well-designed PRP scheme and examine key questions and evidence through literature reviews. Discover the mixed evidence on PRP benefits and drawbacks. Uncover research gaps and the need for further studies to enhance understanding.

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Performance Related Pay in Public Sector: Exploring Known Unknowns

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  1. Performance Related Pay in the Public Sector: the Known UnknownsMargaret McEvoyChief EconomistOffice of Manpower Economics

  2. Why the interest in PRP • OME supports 7 pay review bodies which make recommendations on pay for 2.5 million workers/ £100bn paybill; • Covers health, education, senior public servants (incljudges, health) police, armed forces, prisons • Workforce = variety of professions/more educated/ more female/ intrinsic motivation; • More recent focus on PRP. Schools now have greater freedoms in setting pay/allowances and linking pay progression to performance.

  3. Teachers’ pay: recent reforms Changes for classroom teachers from Sept ’13 • extension of performance-related pay progression to all; • abolition of mandatory pay pointswithin pay ranges; • new leading practitioner pay range enabling the very best teachers to stay in classrooms; • greater discretion for schools in use of allowances.

  4. Teachers’ pay: recent reforms Changes to leadership pay from Sept ‘14 • new national framework for local decisions taking account of school circs/challenge of role; • removal of complex rules on starting pay and differentials within the leadership group; • abolition of fixed pay points within pay bands.

  5. Key questions and evidence • What is the evidence on the impact, effectiveness and value for money of PRP in public sector? • What are characteristics of a well designed PRP scheme? Literature review of PRP in the public sector: two studies commissioned by OME; • Performance related pay in the public sector: a review of the issues and evidence by Burgess, Propper, and Prentice (2007) • A review of the evidence on the impact, effectiveness and value for money of PRP by The Work Foundation – (expect to publish Autumn 2014).

  6. Evidence on PRP Is mixed but suggests; It can increase productivity through • Improved motivation; • Recruitment of more effective staff; • Retention of high achievers/improved performance/shedding of low achievers. Though disadvantages • Difficult to implement/multiple principles/misallocation of effort; • Intrinsic motivation of workers could be reduced; • Risk of gaming/strategic behaviour.

  7. Drawbacks of research base • Paucity of evidence; • Studies mainly in health, education and the civil service; • Mainly from the US; • Few experimental studies; • Little evidence on cost effectiveness or vfm.

  8. Evidence Gaps: research needed on PRP to • improve knowledge of what works for UK public sector /professions/groups; • measure longtermimpacts; • establish differential impacts eg on high/low paid, male/female workers, high/low awards; • establish the full costs, benefits and vfm.

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