Design Components of Incentive Pay Programmes in the Education Sector

Education reform is increasingly focused on human capital formation because high-quality teachers are seen as the most direct and effective pathways to improving student achievement. Based on the argument that prevailing compensation practices provide weak incentives for teachers, and that inefficiencies arise from rigidities in current compensation policies, several national systems of public education have explored teacher compensation reforms (Podgursky and Springer, 2007).1 Proponents argue that financial incentives can motivate teachers to achieve higher levels of performance, entice more effective teachers to join or remain in the teaching profession, and align teacher behaviours and interests with institutional goals.