The National Association of Head Teachers said it could not support the expansion of merit pay to an extra 200,000 staff unless the new scheme allowed the vast majority of teachers to pass to the top of the earnings scale, currently at pound;32,250.
The Secondary Heads Association also condemned the plans, which would see teachers on the main pay scale losing their right to virtually automatic annual pay rises in favour of performance pay linked to pupils' results and behaviour.
School standards minister David Miliband suggested that teachers choose between large across-the-board pay rises and cutting workload.
The heads' ultimatum comes only months after the two unions forced ministers to come up with extra money for performance pay by threatening industrial action. At least 80 per cent of senior staff in England are now likely to benefit from pound;1,000 awards. In Wales, all senior teachers who meet the performance criteria are expected to receive the extra money.
The unions say it is too early to talk in terms of action now. They are hoping that the School Teachers' Review Body will reject the proposals which were outlined to them in a letter from Education Secretary Estelle Morris.
David Hart, NAHT general secretary, said: "I cannot see how we can support any scheme that does not allow for a significant majority of teachers to reach pound;32,000.
"If ministers want a system where the minority of teachers get to that figure, it will be doomed to failure because it will damage recruitment and retention very badly."
Ms Morris believes performance pay standards should become more challenging, with the suggestion that only the very best staff will reach the top of the pay spine.
Her deputy, Mr Miliband, said: "Money doesn't grow on trees. The more money you put into a pay rise, the less there is for classroom assistants who could take some of the workload strain."
He emphasised that the Government's decision to shorten the pay scale from nine points to six so teachers could reach the performance threshold more quickly meant staff would get much larger annual increases this year.
He said: "That makes those points extremely valuable. Given the steeper steps, I think (whether we should expand performance pay) is a perfectly legitimate question to ask."
He admitted that he and his colleagues were under pressure to deliver reforms after schools, colleges and universities were handed an extra pound;13.8 billion a year in last month's comprehensive spending review. But he said that the Government would not do anything which damaged recruitment and retention.
For the first time this year, Ms Morris will have the power to make detailed changes to pay and conditions without formal reference to the review body.
Ministers also face opposition from classroom unions after Ms Morris appeared to rule out any significant increase in the London cost-of-living allowance.
Unions, governors and academics united to attack the merit pay plans. Ted Wragg, professor of education at Exeter University, said: "I'm astonished that a Labour government is introducing probably the most right-wing, market-orientated approach to salaries and conditions that has ever been undertaken."
Leader, 12, Debate, 13
REVIEWBODY TO CONSIDER:
* Three-year pay deal for teachers from 2003.
* Special recruitment and retention packages for inner London teachers.
* No major blanket increase in London allowance.
* Only best teachers get top rates of performance pay.
* Senior staff receive one-off bonuses, rather than year-on-year rises.
* Extra pay for science and maths teachers.
IN THE LONGER TERM
* Performance pay for teachers on main scale.
* Heads given greater flexibility to vary pay rates.
* Teachers continue to receive extra to pay GTC fees.