The government has scrapped its plan to limit heads' pay to that of the Prime Minister from September, The TES can reveal.
In a climbdown, Education Secretary Michael Gove has conceded that a salary cap - which would currently be #163;142,500 - is too complex a move at short notice.
He has also bowed to pressure that he should not fast-track the introduction of a cap without the issue first being considered by the School Teachers' Review Body (STRB), which advises ministers on pay.
The STRB and teaching unions reacted angrily when Mr Gove suggested barring heads from earning more than the PM without carrying out a full consultation.
Anne Wright, STRB chair, warned Mr Gove that introducing the cap could have the unintended effect of "upward pay drift", with more heads being awarded the top rate.
In response, Mr Gove has written to the STRB informing it that he has put plans for a cap on hold.
"On balance I have concluded that there is a need to look further at the implementation of a limit as part of a wider review of leadership pay, in the context of the Government's policy on senior salaries in the public sector," he wrote. "As an interim measure I shall write to relevant bodies about the need to exercise senior pay restraint."
Mr Gove said he would issue a formal remit, including a "consideration of a limit on headteacher pay", to the STRB shortly.
The proposal for a cap comes after a period of rapid growth in heads' pay prompted by the expansion of academies and the numbers of executive heads running more than one school.
Academies are free to set salaries outside national pay scales, but the Government is keen for any limit to be applied to academies as well.
Martin Freedman, head of pay at the Association of Teachers and Lecturers, said: "We are pleased that Michael Gove has listened to reason and want to work with him on leadership pay.
"In principle a cap is worth looking at, but it will depend on how it is implemented and how it relates to other teachers' pay. The current situation is that governing bodies can go over the top of the scale by an infinite amount, which is not a position we support. To have ignored the STRB on this issue would have set a very bad precedent."
John Dunford, general secretary of the Association of School and College Leaders, said: "It's right and proper that the STRB should consider headteacher pay in the context of a wider review of school leadership, which it has been wanting to do for some time.
"Artificial caps will almost always create difficulties somewhere. We have to make sure headteachers can be properly rewarded, especially when they are taking on the leadership of several difficult schools.
"But my main concern is that the discussion of the top-end headteacher salaries disguises the fact that heads of average size schools of 1,000 pupils, with huge responsibilities, are by no means overpaid."