Teachers who are deemed to be under-performing should be paid less than their 'better' collegaues, under new proposals from MPs.
Teachers adding the most to pupil's performance should be financially rewarded, the Commons Education Select Committee said.
In a new report, the influential committee examined the best ways of recruiting and retaining the best teachers.
Evidence has shown that very good teachers boost pupils' grades and make a significant difference to their students' future earnings, it said.
The report calls for the DfE to develop plans for a pay system which rewards teachers who add the greatest value to pupil performance.
"We acknowledge the potential political and practical difficulties in introducing such a system, but the comparative impact of an outstanding teacher is so great that we believe such difficulties must be overcome," it says.
But Christine Blower, general secretary of the National Union of Teachers (NUT), said: "Payment by results is total nonsense. Children are not tins of beans and schools are not factory production lines. Successful schools rely on a collegiate approach and team working.
"Performance-related pay (PRP) is not only inappropriate but also divisive. Children and young people differ and class intakes differ from year to year, making it impossible to measure progress in simplistic terms.
"PRP will create even more difficulties for schools facing the most challenges because teachers will realise that they will get no thanks for teaching their students but will get more money by going elsewhere."
"Teaching taster classes" should be offered to sixth-formers and undergraduates to show them the benefits of a career in the profession, the committee said.
It also called for would-be teachers to be observed in the classroom before they are offered a training place to check their suitability for the job.
"Our evidence was clear that teacher quality cannot be fully established without observing a candidate actually teach," the report says.
The MPs backed ministers' plans to toughen up the literacy and numeracy tests taken by trainee teachers but suggested caution over the introduction of a test of candidates' personal skills.
The committee said it welcomed the idea but called for the Department for Education to publish details of what the test might include and keep it under close review.
It raised concerns about the government's move to use a potential teacher's degree class to determine whether or not they get a bursary to train.
Under the Government's plans, anyone with a third-class degree will not be eligible for funding. But the committee said that the bursary scheme alone will not attract more people into teaching.
"Whilst bursaries will help to attract people with strong academic records, greater effort is also needed to identify which subset of these also possess the additional personal qualities that will make them well-suited to teaching," the report says.
It also backed ministers' plans to create "teaching schools" to train teachers.
While it acknowledged that these schools will be expected to work with universities, the committee warned against any reduction of universities' role in teacher training which would bring "considerable demerits".
The report suggests the creation of a National Teacher Sabbatical Scholarship scheme to allow outstanding teachers to take time out of the classroom to work in a different school, undertake research or refresh their subject knowledge.
It echoes a suggestion made by Ofsted chief inspector Sir Michael Wilshaw, who said in November that good teachers who suffer "burnout" should be given time off.
It also called for the government to develop plans for a new "College of Teaching", a professional body modelled along the lines of Royal College or chartered institutes seen in other professions.
Committee chairman Graham Stuart said: "It's crucial that we have an educational system which celebrates great teachers, keeps more of them in the classroom, supports their development and gives them greater status and reward."
Schools Minister Nick Gibb said: "As all the evidence from around the world shows, nothing is more important for raising standards in our schools than ensuring that we have more great teachers.
"Although the quality of our teachers is very high, many top graduates who could make a huge difference to children's education are choosing other professions. This report supports the Government's strategy for teacher recruitment as being appropriately focused on attracting top graduates into the profession and giving them outstanding training."
A DfE spokesman said the Teaching Agency has launched a School Experience Programme for would-be maths and science teachers.
Brian Lightman, general secretary of the Association of School and College Leaders (ASCL), said: "This is a welcome report which highlights the difference good teachers make to the life chances of young people and the importance of doing everything we can to attract and retain the highest calibre of graduates.
In its thorough investigation of the factors which will enable this to happen, the select committee has made a valuable contribution to future policy development.
"The emphasis on continuing professional development, including the proposal for sabbatical scholarships, the recommendation for a national, high-level continuous professional development (CPD) strategy and, eventually, an entitlement to CPD, will all be warmly welcomed by school and college leaders.
"Teacher tasters for sixth-formers and undergraduates could be useful for spotting potential if they are managed carefully."