Avoiding the pitfalls of performance pay

Written by: HTU | Published:

Schools are getting to grips this term with the new system of performance-related pay. Employment lawyer Amanda Lyons looks at common pitfalls that new pay systems must avoid.

Revised teachers’ pay and conditions arrangements, including plans for performance-related pay, came into force on September 1 last year. The main aim of the changes is to give headteachers the freedom and autonomy to recruit, reward and retain high-performing teachers by removing the traditional link between length of service and pay, and replacing it with a new system of pay awards based solely on individual performance.

Of course the risk is that this could lead to tension between teachers and damage staff morale, with critics citing concerns such as decisions about pay being made in response to funding pressures, or whether or not a “face fits” in any particular school. Whatever your view, it is now up to individual schools to decide for themselves how to best implement the changes and develop their pay and appraisal policies accordingly. No single approach will suit all schools.

Summary of the changes 

So what do the changes mean for schools? The main implications are: 

  • Removing pay progression based on length of service and linking all pay progression to performance.
  • Giving schools the option of increasing individual teachers’ pay at different rates based on their performance.
  • Replacing the current threshold test for progression from the main to the upper pay range with new “simpler” criteria.
  • Discontinuing the current Advanced Skills Teacher (AST) and Excellent Teacher (ET) designations and creating a new pay range for Leading Practitioners, whose primary purpose is to model and lead the improvement of teaching skills.
  • Giving schools more freedom to determine starting salaries of teachers new to the school by removing any obligation on schools when recruiting to match a teacher’s existing salary.


The changes came into force last term which means that September 2013 was the last time that annual increments could be awarded to teachers based on their length of service. From September 2014, the first performance-related pay increases will commence and schools need to take/should have already taken the following steps to ensure that they are ready:

  • By September 2013: schools should have reviewed and revised their pay and appraisal policies (we consider these in more detail later).
  • This year: teachers should be monitored throughout the 2013/14 academic year in accordance with the appraisal policy. 
  • Summer term 2014: teachers’ appraisals should be conducted.
  • September 2014: first performance-related pay increments to be made.
  • On-going: monitoring of your policies and whether any problems have occurred in this process.

Possible pitfalls

A key risk with any performance-related pay system is the scope for either perceived or actual unfairness in its operation. Ensuring that your policies are clear and comprehensive (and made readily available to your staff) and that you apply these policies consistently, objectively and transparently in your school is vital to help reduce the risk of complaints from staff.

All employers are required to comply with equality legislation in their treatment of staff. The Equality Act 2010 prohibits an employer from treating its employees less favourably than others because of any of the following “protected characteristics” – Sex; Race; Religion or belief; Sexual orientation; Disability; Age; Pregnancy or maternity; Marital status; Gender reassignment.

“Direct” discrimination is unlawful under the Equality Act meaning that employers cannot treat individuals less favourably than others because of one of the protected characteristics. For example, if a school were to make a decision not to award a teacher a pay increment because they were more junior and younger (despite having met all of their objectives) and the school considered that they had not worked long enough to have “earned” the increase, this would be a clear case of unlawful direct age discrimination.

However, schools also need to be mindful of having in place a “provision, criterion or practice” which, although on the face of it appears neutral, actually puts those with one of the protected characteristics listed above at a particular disadvantage. This is known as “indirect discrimination”. Schools need to be especially mindful of this when determining what criteria to adopt in order to determine pay progression. 

Perhaps the most obvious example of this is if one of the criteria relates to the amount of extra-curricular activities that teachers participate in. On the face of it, it is applied equally to everyone. 

However, in practice it is more likely to put those with childcare arrangements (who are generally more likely to be women) at a particular disadvantage as they will be less likely to participate in such activities. Equality Impact Assessments will often be a key tool to demonstrate that the school has considered its equality obligations and to help understand the impact of your polices.

In addition, the Department for Education (DfE) guidance (see further information) requires pay policies to make it clear how teachers on long-term leave (eg, continued sickness absence/maternity leave) should be treated in relation to pay progression. 

However, the DfE’s model pay policy does not include any proposed wording on this. Schools therefore need to think carefully about what measures they will put in place in such situations. For example, schools may wish to pro-rata the increment to reflect the amount of the year the individual was at work, or alternatively consider using a different time period as the reference period for assessment, which might be the period immediately before and after the teacher was on leave.

There is a raft of statutory protection for employees on maternity provisions and, although employees on sickness absence do not generally have the same extent of legal protection, if their condition amounts to a disability under the Equality Act 2010 schools need to think carefully about whether they will make any adjustments to the operation of their pay policy, in accordance with the statutory duty to make “reasonable adjustments” for disabled employees.

Pay policy

The DfE has issued detailed non-statutory guidance, together with a model pay policy, which was most recently updated in August 2013. The starting point for the pay policy is that it must contain sufficient information for teachers to understand the basis upon which pay decisions will be made in their school, in order to avoid them complaining down the line that they did not know what was required of them in order to achieve an increment. 

The policy must make clear the levels of performance that will be required for pay progression to be awarded and how progression will be differentiated, for example in order to enable the highest performing teachers to progress most quickly. The DfE advice provides that the following specific criteria should be considered when deciding whether or not to award a pay rise, assessing teachers in the following key areas:

  • Impact on pupil progress.
  • Impact on wider outcomes for pupils.
  • Contribution to improvement in other areas (eg, pupil behaviour or lesson planning).
  • Professional and career development.
  • Wider contributions to the work of the school, including outside the classroom.


Schools must also decide which sources of evidence will form the basis of the decision, for example self-assessment, peer review, tracking pupil progress, lesson observations, views of pupils and parents etc. It is important that the pay policy makes it expressly clear that failure to receive an increment does not necessarily mean that action will be taken under the capability process. 

Appraisal policy 

The DfE has also provided an optional model appraisal policy which schools may choose to adopt or use as the basis of their own policy. All policies should: 

  • Make it clear that it is intended to be a supportive, developmental process.
  • Make it clear how teachers’ objectives will be set, how their performance will be assessed, and how decisions will be moderated.
  • Make it clear how observation will be managed within the school and how much observation is likely to take place.
  • Make it clear what other evidence will be reviewed as part of the appraisal process (eg, lesson plans/marking etc).
  • Make sure the standard appraisal reports include the necessary information to form the basis of pay recommendations.

If your decisions around pay increments are ever challenged in an employment tribunal, written records of the reasons for those decisions are key, so it is essential that you retain all appraisal reports, feedback forms and outcome letters.

  • Amanda Lyons is an employment lawyer at DMH Stallard.

Further information

Reviewing and Revising a School’s Approach to Teachers’ Pay (DfE guidance and model pay policy, last updated August 2013): www.education.gov.uk/aboutdfe/advice/f00224072/review-teacher-pay

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