Performance-related-pay in the UK public sector: A review of the recent evidence on effectiveness and value for money

The purpose of this paper is to provide an up-to-date, comprehensive, independent and credible assessment of relevant academic and other literature since 2007, on the effectiveness and value for money of performance-related-pay (PRP) in the public sector.

PRP was studied using both economics-based literature and literature from the organisational and management field (including human resources, management sociology and psychology). An initial search of databases identified 7,401 documents regarding PRP in the public sector, which was reduced to 57 final papers included in the study (27 in the health sector, 16 in the education sector and 16 in the civil service) after abstract and full paper screening.

The review found some evidence that PRP schemes can be effective across the three domains of the public sector for which there was evidence available (health, education and the civil service), but findings within and between the sectors are mixed, with scheme effectiveness often dependent on scheme design and organisational context.

The research highlights the importance of considering both economics-based and organisational literature when discussing PRP in the public sector, and the implications for motivation and PRP design.

The results indicated that the design of PRP schemes could influence their effectiveness and outcomes, and the research suggests how the challenges of designing and implementing PRP schemes can be overcome in the public sector.

The review highlights that when implementing PRP schemes there may be gender differences in their overall effectiveness (especially in education) and there must be consideration for how fairly the PRP scheme is perceived.

The paper uses literature from economics and behavioural sciences when looking at the motivational implications for PRP in the public sector.