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Across the country, states and districts are struggling to attract, support, and retain high-quality teachers in the classroom. The limitations of the traditional salary schedule in attracting and keeping good teachers have prompted many policymakers to search for alternative methods of compensation. In this paper, we examine teacher compensation policies in charter and private schools for lessons to help traditional public schools more effectively draw and keep high-quality teachers.

Charter and private schools make much greater use of pay innovations than traditional public schools, and there is some recent evidence that they have been more successful at recruiting teachers with higher academic credentials. We looked to national surveys of charter and private schools and interviews with leading charter and private school networks for their answers to several key questions that animate the current debates over teacher pay in public schools:

• How much should teachers be paid, and who should decide?
• Should some of teacher pay be tied to performance, and if so how?
• How should pay be designed to attract teachers to hard-to-staff positions?
• What rewards other than pay should be part of the overall package for teachers?

We found several common trends in charter and private schools that differ significantly from pay experiments in traditional public schools:

• Strict salary schedules play a much smaller role in charter and private schools in determin­ing teachers’ base pay. Many charter and private schools do not use a schedule at all, and even those that do tend to use it as a starting point rather than the sole determinant of teachers’ pay.
• Charter and private schools are more likely than district schools to tie some portion of teachers’ pay to performance, and a significant number also use higher pay to fill hard-to-staff positions.
• Charter and private schools also make much greater use of non-financial rewards than district schools to draw and keep the best teachers.

Most importantly, what emerged from our research is a picture of what school and system leaders do with pay when they are free to use compensation as a tool to meet their goals. Though they are free from many of the rules and constraints that govern pay in traditional public schools, school and system leaders in the charter and private sector have not created a new formula-driven system to replace the traditional salary schedule. Instead, our data and examples suggest that they have thrown out the very idea of formulas, substituting instead substantial discretion for school-level leaders to use com­pensation in pursuit of goals.

School-based decision-making is common in these schools, and it allows principals to adjust teacher salaries to the individual needs of their schools and to market realities in their communities. It provides room for creativity in teacher compensation and programs that respond directly to teachers’ needs. It allows schools to try different approaches, discarding the ones that do not work and keeping the ones that do. It makes it possible to evolve pay systems over time, adapting to new realities and new needs.

The experience of leading charter and private school networks with teacher compensation suggests a potential “two-track” strategy for public policymakers committed to compensation reform. On one track, in recognition of the longstanding nature of current formula-based systems, policymakers could work to make teacher pay more performance- and market-driven, but still within the context of a formulaic, schedule-based approach. Policy changes could include pay-for-performance based on value-added test score growth, higher pay for filling hard-to-staff positions, higher pay for teaching in hard-to-staff schools, or any number of other approaches to “paying for contribution” rather than just for experience and degrees.1 Such changes would make the baseline system of teacher compensation more likely to attract and retain effective teachers and to place them where they are needed the most.

On the other track, policymakers could seek ways to bring the same kind of dynamism, experimenta­tion, and flexibility that we see in charter and private schools into the public school system. Follow­ing this track, policymakers could allow select schools to enter a more flexible compensation regime, perhaps based on their past performance or willingness to accept stricter forms of accountability. While most schools would remain in a formulaic (though improved) system, a growing subset could be part of a dynamic segment that, ideally, would produce lessons over time that could be widely adopted in the public system.

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