The scheme puts highly experienced teachers in mentoring roles, helping other staff. It allows high quality teachers to opt out of management and keep a direct influence on the classroom.
Mrs Holden, 55, had been receiving a management allowance for her role as science co-ordinator at Prescot County primary in Knowsley, Merseyside, but decided not to apply for a teaching and learning responsibility payment. By opting for excellent teacher, she gets the extra payment and can remain a classroom teacher.
"My management allowance is safeguarded until September 2008. Then, I will start to receive my excellent teacher salary, which will be about pound;1,000 less. But I was never in it for the money."
She said she could see the advantage of the School Teachers' Review Body's recommendation giving heads more flexibility in rewarding excellent teachers.
Mrs Holden said: "The flexibility is good: teachers deserve these incentives. But it would be unfair if people are paid more for being an excellent teacher in music or maths, just because of the market."
The Education Secretary agreed that excellent teachers' pay should be set individually, according to the nature of the work and the degree of challenge, but he refused to take into account local criteria such as staff shortages.