ABSTRACT
This chapter provides an introduction of performance pay in the British public services in light of several types of arguments. The first argument has been developed most forcefully by Jean Tirole and Susan Rose-Ackerman. They stress that one peculiarity of the public sector is that there are “multiple principals.” The second argument relates to individual employees’ objectives. A great deal of public service work is not readily amenable to objective measures of individual output or performance. The public service argument is one that has surfaced in many forms. In part, it reflects the quality versus quantity choice. It also reflects the idea that the work undertaken in public services differs from that in private services. In Britain, from the mid-1980s there has been a clear central strategy for public management reform. Performance awards took the form of movements along the existing pay scale, resulting in accelerated increments for those who received performance awards.
