Performance Related Pay in the
Public Sector: the Known
Unknowns
Margaret McEvoy
Chief Economist
Office of Manpower Economics

• OME supports 7 pay review bodies which make recommendations on pay for 2.5 million workers/
£100bn paybill;
• Covers health, education, senior public servants
(incl judges, 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.

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

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.

• 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).

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.

• 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.

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