Archived Information

CPRE Financial Briefs: Reinventing Teacher Compensation Systems - September 1995

Elements of New Compensation Systems

Three major elements should be considered in redesigning teacher compensation: skills- or competency-based pay, pay-at-risk, and group-based performance awards.

Skills- or Competency-based Pay

The single-salary schedule currently provides pay increases for years of experience, education units and university degrees. These variables are indirect indicators of knowledge and skills; under this system, a teacher with more education units and more experience in the classroom is assumed to have developed a greater professional expertise. Furthermore, many of the credits used as bases for salary increases are only loosely--if at all--connected to teaching responsibilities or to emerging notions of challenging subject-matter instruction.

A skills- or competency-based pay system would more directly measure teacher knowledge and skills. Such a system could reward the development of three types of knowledge and skills. The first, and most critical, would be depth in the areas of content, curriculum and instructional expertise. A second set of skills would be "breadth" skills--those vital to important non-teaching functions such as curriculum development, professional development, guidance counseling, and parent outreach. A third set would be "management" skills, particularly for schools engaged in site-based management.

A skills/competency-based pay salary component could be added to the current salary schedule, replace either the education or experience component of the current salary schedule, or replace both components (see Models 1, 2, 3, and 4 for examples of salary schedules incorporating elements of skills-based pay).

For example, salary increases could be tied to professional licensure and certification such as that being developed by the Interstate New Teacher Assessment and Support Consortium (see INTASC, 1995), the Educational Testing Service's PRAXIS, and the National Board for Professional Teaching Standards. Teachers could start their teaching career with a provisional license (a temporary teaching permit) at a beginning salary level, and earn significant bumps in pay when they receive a professional teaching license, and if they become certified by the National Board for Professional Teaching Standards. A local or national skills-assessment system driven by the teaching profession could identify and assess additional milestones between professional licensure and Board certification. Locally determined salary increases could be linked to these accomplishments.

Skills-based pay should be clearly distinguished from individual performance-based pay systems which traditionally have evaluated teachers against one another for a fixed pool of funds. Individual performance systems usually aim to identify and reward the "best" teachers with additional pay. In contrast, skills-based pay rewards teachers for attaining and being able to use knowledge and competencies valued by the school--such as the ability to teach all students the mathematics promoted by the National Council of Teachers of Mathematics. Skill attainment is judged against a predetermined, clear-cut standard. It does not create competition among teachers, but signals the type of skills the school wants its faculty to acquire. Skills-based pay systems, thus, focus individual skill development on the knowledge and skills necessary for the organization to accomplish its goals.

School-Based Rewards in Dallas, Texas

The Dallas school-based performance award is part of the district's accountability system, created by a 1990 Commission with substantial business community involvement. The performance measure is primarily based on the results of the Texas Assessment of Academic Skills, and the Iowa Test of Basic Skills, with weights for each that vary annually.

The award is based on gain scores, aggregated to the school level from individual student data. Through complex two-stage regression analysis, the predicted score is purged of the influence of socio-economic variables including race, ethnicity, English proficiency, school mobility, poverty status, and school overcrowding. These achievement gains are supplemented by school-wide measures of student attendance, grade-to-grade promotion, drop-out rates, enrollments in accelerated courses, and SAT and PSAT scores.

Schools' final performance gain scores are then ranked from highest to lowest. Each winning school receives $2,000, its principal and teachers receive a bonus of $1,000, and the nonprofessional staff receive $500 each from a fixed pot of money. Awards are provided to staffs and schools by rank order, until the budgeted amount is expended. In 1994-95, Dallas created a second tier of winners, with bonuses of $450 for the professionals and $225 for the non-professional staff, to provide incentives to the lower ranked but still improving schools.


Some organizations require employees to put a portion of base pay "at-risk" until key sales or financial targets are met. This notion of pay-at-risk does not fit education. But at General Motors' new Saturn plant in Tennessee, employees have 10 percent of their base pay at-risk in ways that may apply to education. Five percent of pay is contingent upon all workers spending at least 5 percent of the work year (92 hours) in ongoing training that is provided by the plant. Another 5 percent is contingent on the plant meeting certain quality and production targets for its cars.

The idea of committing teachers, schools and school systems to an ongoing training process as well as to meeting high quality standards could have appeal in education. Thus, a percentage of teachers' base pay could be contingent upon each teacher engaging in a specified amount of professional development each year, such as 100 hours. The district or school would have to provide professional development opportunities and the teacher would have a strong incentive to participate. Such training could focus primarily on development of the various competencies in a skills- based pay structure. Careful thought would need to go into the design and implementation of the professional development activities to be sure they are effective and support the student learning goals of the school and district.

The quality concept could be transferred in many ways to education. One way would be to require the faculty to work together to produce a performance report, such as the School Quality Review in New York State. The report would provide a vehicle for faculty to develop reflective practice, and for them to take part in an ongoing process of improving both teaching skills and the educational program.

In short, states or districts could put a portion of teacher pay at-risk, with some percentage contingent upon engaging in ongoing professional development and the remainder contingent on producing a focused, useful, quality performance report which assesses the educational strategies of the school in light of student achievement targets.

Group-based Performance Awards

Group-based performance awards, or collective incentive-pay plans, recognize that student outcomes are the joint product of many teachers working together in a school. They explicitly encourage school staff to work together toward common goals--such as improving student performance. Collective incentives provide an important symbolic focus on outcomes while avoiding the divisive aspects of individual performance incentives.

Current Step and Column Salary Schedule with Skills-Based Pay Additions

(professionally and locally assessed)
Experience Column 1
Column 2
Column 3
Column 4
Skills-Based Pay Increments (professionally assessed) Skills-Based Pay Increments (examples) (locally assessed)
Step 1

Passing a Content Test in Area of License Non-graded Primary School
Step 2

Licensure in a Second Area Cooperative Learning
Step 3

Licensure in a Shortage Area Reading Recovery
Step 4

Certification from National Board for Professional Teaching Standards Computer Skills
Step 5

Step 6

Step 7

Step 8

Step n

Model 1 maintains the current single-salary schedule structure, with annual increments for years of experience (steps) and additional educational units (columns). It adds to this structure salary increments for skills demonstrated through professional assessment procedures, and for skills identified and assessed locally by the school or district. Local districts could determine the degree to which educational units (columns) would need to be related to areas of licensure and local educational needs. Currently, some locals and states make these requirements; others do not. Specific dollar amounts would be identified for each cell in this model.

Individual merit pay, the most commonly applied outcome-oriented incentive system in education, creates competitive rather than collegial work environments. In addition, the underlying assumption of individual merit pay is that the individual teacher has control over the achievement of school goals. By contrast, collective incentives, such as group-based performance awards, assume the entire faculty and students must work together to produce student performance and, thus, provide to everyone in a school a salary bonus for achieving collective goals.

Group-based performance incentives could provide bonuses to all school employees or to teams of teachers, and additional funds for the school when, for example, student achievement in core content areas exceeded some predetermined criterion for improvement.

Gainsharing is another type of group-based performance incentive. Gainsharing programs provide incentives for employees to find more efficient means of achieving organizational goals. For example, school faculties that found lower-cost means of providing the same quality services could receive a portion of the cost-savings, with the rest of the funds going toward instructional materials.

Group-based performance awards would need to be carefully designed. They would need to be based on improvements in performance. They also would need to be adjusted for student mobility, be explicit about the achievement targets for students in special education programs, capture student performance across the full range in order not to ignore the bottom half, and include appropriate modifications for socio-economic background, to insure a level playing field participation in the award.

Performance Reviews for Annual Increments Combined with Skills-based Pay Elements
Annual Performance Reviews Additional Local Skills/Competencies
Performance Review 1 Skill Area A
Performance Review 2 Skill Area B Certification from National Board for Professional Teaching Standards: 5-10 percent salary addition over base salary from both Columns 1 and 2 but only after Performance Review at some step, e.g., Step 4.
Performance Review 3 Skill Area C
Performance Review 4 Skill Area D
Performance Review 5 Skill Area E
Performance Review 6 Skill Area F
Performance Review 7
Performance Review 8
Performance Review 9
Performance Review 10

Model 2 modifies the current single-salary schedule by providing annual salary increments (steps) only for those teachers who have successfully passed a performance review, ideally, conducted through a professional, peer-review process. Teachers would also receive pay increments for demonstrating skills and competencies identified by the local school or district as those needed to achieve student achievement goals. The specified skills could be learned in a variety of ways (such as through coursework, staff development, individual research, or professional networking opportunities), and would replace the educational units in the traditional single-salary schedule. In addition, teachers who achieved certification from the National Board for Professional Teaching Standards would receive a 5-10 percent pay increase. Specific dollar amounts would need to be identified for each cell in this model.

A Skills-based Teacher Compensation Schedule for Board Certification and Retention
Primary Content Specialty
Second Content Specialty
Entry Level with full Teacher License
Extra amount for a full Second License
Advanced 1
Advanced 1
Advanced 2 (Tenured)
Advanced 2
Advanced 3 Model 3 completely replaces the current single-salary schedule with a skills-based compensation schedule. Under this plan, teachers would receive pay increments for demonstrating skills and competencies identified by the teaching profession as reflective of what excellent teachers should know and be able to do at various stages in their careers.

Only after being certified by th National Board for Professional Teaching Standards would teachers begin to receive annual increments for years of experience beyond Board Certification. This would provide an incentive for outstanding teachers to remain in the teaching profession. Teachers could also receive additional pay for demonstrating skills in a second content area. Specific dollar amounts would need to be identified for each cell in this model.

Advanced 4
Advanced 5
National Board Certification
Years of Experience after Board Certification
Step 1
Step 2
Step 3
Step 4
Step 5
Step n=???


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