Headteachers are to be given the power to give their top performing teachers a two per cent pay rise.
Education Secretary Nicky Morgan said that schools across England and Wales will be given the ability to reward their best staff with a salary rise that exceeds the public sector pay limit of one per cent imposed by the Government.
Teachers received a one per cent pay rise last year, after two years of salary freezes.
Mrs Morgan said the new rules will ensure that top performing staff can receive bigger pay rises.
She said: "This country is lucky to have a truly exceptional teaching workforce who do a vital job of opening up young minds.
"That's why I'm delighted to approve a pay deal today which gives heads the freedom to offer their best and most experienced teachers a two per cent pay rise, something that is only possible because we trust heads and governors to decide how to reward their staff."
Last month, Labour said if it's elected in May, headteachers will receive lessons from top businesses in managing their multimillion-pound budgets and work forces.
School bosses will get coaching from captains of industry in a bid to boost leadership qualities.
Shadow Education Secretary Tristram Hunt said: "Business leaders, headteachers and government all have a part to play in delivering the best education for every child, in every classroom, in every school.
"By working together we can ensure all schools, all children and all businesses benefit from the top quality leadership needed for head teachers to manage effectively."
School inspectors warned weak leadership was a major cause of poor standards, identifying nearly 3,500 schools where the quality of leadership was not good enough.
The headteacher of an average secondary school in England controls a £4.5 million budget and manages about 130 staff.