• Subject Name : Arts and Humanities

Using Performance on the Job to Inform Teacher Tenure Decisions

Abstract on Teacher Compensation Systems

Performance based payment or pay-for-performance is a strategy implemented by organizations for satisfying the employees and earning high profit. The current study has been conducted in order to identify the measures using which the effectiveness of the pay-for-performance plans of the organizations are evaluated. Along with this, the advantages and disadvantages of the pay for performance plan have been identified from perspective of both employers and the employees.

Table of Contents


How could an organization measure the effectiveness of their pay for performance plans?.

From an employee’s perspective, what are the advantages and disadvantages of using pay-for-performance plan?.

From an employer’s perspective, what are the advantages and disadvantages of using pay for performance plan?.


Reference list

Introduction to Teacher Compensation Systems

The pay-for-performance compensation programs are developed for rewarding and providing incentives to the employees based on their performance for achieving certain goals or objectives. This model is used by the organization considering different factors such as the compensation philosophy, organizational budget and its goals. The current study aims at identifying the methods that organizations use for measuring the effectiveness of their pay-for-performance plan. Apart from that, the advantages and disadvantages of pay-for-performance plans from the perspective of both employees and employers will be discussed.

1. How Could an Organization Measure the Effectiveness of Their Pay for Performance Plans?

It has been observed that in most of the high income countries depend upon the pay-for-performance systems though, there is a lack of data about how it impacts upon the low and middle income countries (Lavy, 2009). It has been identified that the pay-for-performance system is target based. Targets are set as performance criteria of the employees achieving which, the employees are given the incentives or rewards. There are several methods used by the organizations for measuring the performance of their pay for performance plans which include rate of turnover. However, Podgursky & Springer (2011) mentioned that reward does not ensure that employee turnover rate will reduce if pay for performance or reward is given to the employees. Staff satisfaction rate is another measure that is used by the organization for the purpose of measuring the effectiveness which is similar to the findings of (Goldhaber, Dan & Michael Hansen, 2010).

The length of service distribution and profit are also used as a measure based on the fact as to what extent organizations are able to reach their customers and how that does is driving profit generation. Apart from that organizations also focus on identify the Job offer refusal rate and degree of staff commitment in order to evaluate the current pay for performance plan used in the organization. Another measurement is the rate of productivity. As mentioned by Ammi & Fortier (2017), the performance of the employees has been observed to improve after introducing them with the pay-for-performance plans. However, other related factors such as work environment, pay grade, job position and other factors might also work behind the high productivity of the employees.

2. From an Employee’s Perspective, What Are the Advantages and Disadvantages of Using Pay-For-Performance Plan?

Though the pay-for-performance plans are developed and implemented to increase the performance effectiveness of the employees, employees may also find some issues regarding the pay-for-performance plans.


  1. Employees may experience greater autonomy and lack of supervising interventions during working in a project as reward ensures high quality work (Lavy, 2009).
  2. The satisfaction level and willingness to perform well in their tasks may increase as the employees are getting an opportunity for increasing their earnings. This also increases their productivity and accountability.
  3. At the time an organization implements highly effective pay-for-performance plans employees less tend to change their jobs as they get the opportunity to increase their salary through high quality performance.
  4. Payment provided for effective performance increases the employee morale as the employees observe that their efforts are being valued by the company.


  1. Pay-for-performance may lead to contention among employees as every employee might not have the capacity to earn incentives which may result in low morale. Employees might raise their concern about unethical practices for paying based on performance if there is a lack of effective and evidence based pay-for-performance plan.
  2. Employees that are unable to gain the rewards may anticipate that their performance will be questioned by their managers and even the employees might hold back the inputs for not avoiding reductions in earnings (Podgursky & Springer, 2011).
  3. Employees that are earning from the pay-for-performance plans of the organization may resist changes that are planned for the sake of the company’s improvement. It is due to the fact that the employees anticipate that changes in the organizational system may not hold the same pay-for-performance plans which will reduce the opportunity to earn incentives.
  4. In order to provide the incentives employee performance may be constantly evaluated which might cause interference in the work autonomy of the employees (Ammi & Fortier, 2017). This might lead to effective performance due to the stress employees are feeling during the evaluation process.

3. From an Employer’s Perspective, What Are the Advantages and Disadvantages of Using Pay for Performance Plan?

Using an employer’s perspective to understand the advantages and the disadvantages of the pay-for-performance it required to be conducted through analyzing how an organization can be benefited in managing employees and performing well in market.


  1. One of the major advantages of pay-for-performance plan is it allows an employer to improve efficiency in production which leads to low cost operation and high profitability for the organization (Ryan et al., 2016).
  2. The money employers are investing can be used for gaining benefits and will help in remaining competitive in the market as it will be able to utilize their monetary resources for the purpose of gaining advantage.
  3. Pay for performance plans also allow the managers to retain the trained and highly skilled employees paying an attractive incentive upon their salary increasing satisfaction.


  1. Competitors might attract the incentivized employees by offering better basic salary which will increase the cost of the employer to train and develop skilled employees.
  2. Pay-for-performance may increase the cost of operations if the employees are not trained enough o deliver quality work (Rockoff et al., 2012). The cost of the organization may also increase as it can hire a consultation firm for evaluating the performance of the employees.
  3. At the time company is facing issues with finance, employers might be unable to maintain their performance based reward plans which lead to reduction of the interest of the employees in their jobs.

Conclusion on Teacher Compensation Systems

In conclusion, it can be stated that pay-for-performance plans are those measured by the company’s performance to retain their employees as well as performing wee in the market. Employees find the pay-for-performance plans advantageous as it provides opportunity to high income. However, employers might find the pay-for-performance plan disadvantageous as it might cause increase in the operating cost and low profitability.

Reference List for Teacher Compensation Systems

Ammi, M., & Fortier, G. (2017). The influence of welfare systems on pay-for-performance programs for general practitioners: A critical review. Social Science & Medicine, 178, 157-166.

Goldhaber, Dan, & Michael Hansen, (2010). “Using Performance on the Job to Inform Teacher Tenure Decisions.” American Economic Review 100 (2), 250–255.

Lavy, V. (2009). Performance pay and teachers' effort, productivity, and grading ethics. American Economic Review, 99(5), 1979-2011.

Podgursky, M., & Springer, M. (2011). Teacher compensation systems in the United States K-12 public school system. National Tax Journal, 64(1), 165.

Rockoff, J. E., Staiger, D. O., Kane, T. J., & Taylor, E. S. (2012). Information and employee evaluation: Evidence from a randomized intervention in public schools. American Economic Review, 102(7), 3184-3213.

Ryan, A. M., Krinsky, S., Kontopantelis, E., & Doran, T. (2016). Long-term evidence for the effect of pay-for-performance in primary care on mortality in the UK: a population study. The Lancet, 388(10041), 268-274.

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