In the knowledge and skills based pay schemes, the teachers are required to demonstrate improvement in their knowledge, skills and expertise such that it provides quality opportunities for student learning (Beavis 2003) , (Ingvarson, Kleinhenz & Wilkinson, 2007). The types of knowledge and skills that may be rewarded in this pay scheme may be “increasing the depth of expertise in teacher’s field of content, curriculum and teaching”, broadening expertise by entering new fields of teaching, and, developing skills in providing “teacher leadership and team management” (Ingvarson, Kleinhenz & Wilkinson, 2007). Thus the aim of the scheme is to offer financial incentives for teacher’s professional development and to support the advancement of workplace culture such that it values employee growth and development (Ingvarson, Kleinhenz & Wilkinson, 2007).
The teacher’s performance assessment is based on criterion or standards. Teaching standards aim to fully cover what effective teachers know and do, it includes their knowledge of content and students and their ability to manage and monitor student learning.
It also incorporates their contribution to the school and the professional community (Ingvarson, Kleinhenz & Wilkinson, 2007).  Advances in new methods for creating teaching standards and assessing teacher performance have greatly benefited the knowledge and skills based system (Ingvarson, Kleinhenz & Wilkinson, 2007).

Skills Based Pay

In addition to interviews, classroom observations and student evaluations teacher assessment may also include videotape evidence, evidence of improvement in students’ work over time, and, documentation on their contribution to improve the profession and the school community. In the knowledge and skills based system the teachers play an active role in getting their performance assessed as they have to provide evidence that their teachings have met the set standards.
As the assessment is based on multiple pieces of evidence the teachers are able to get a valid and useful assessment of their performance unlike the merit pay system which was based solely on the principal or senior instructor collecting evidence or student test scores (Beavis 2003), (Ingvarson, Kleinhenz & Wilkinson, 2007).
Some analysts suggest that the knowledge and skills based system also provides intrinsic rewards for teachers in the form of enjoyment and satisfaction from improvement in students’ performance (Beavis 2003).

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