Every school which gets out of special measures will receive a share of a pound;60 million fund to be divided between staff under the Government's School Achievement Awards initiative.
Cash will also go to schools which show the greatest improvement in results over three years, and those which perform exceptionally well in a single year compared to schools with similar socio-economic intakes.
Around 7,000 schools should get an award each year. Its size will depend on pupil numbers, with a school of 200 getting around pound;6,000 and one of pound;1,000 getting pound;30,000. Non-teaching staff will be eligible and governors will decide how the cas is divided up. It would amount to several hundred pounds per person, but will be taxed.
Ministers believe it will reward and encourage teamwork - something teachers say performance pay will not. Schools minister Estelle Morris said: "We want as many schools as possible to win an award. We also want to make sure schools working under difficult circumstances get a fair share."
The awards will be based on test and exam results, to avoid extra paperwork. Special schools will be nominated by chief education officers.
David Hart, general secretary of the National Association of Head Teachers, said the pound;60m would be better spent supporting schools through the introduction of performance pay. "It's a quite unnecessary distraction," he said.