Teachers should receive pay increases based on their classroom performance and student feedback, not years in the profession, according to a new report commissioned by a group representing Canada's largest employers.

The report from the Canadian Council of Chief Executives (CCCE) says the current teacher compensation model is ineffective, and that its recommendations could improve the quality of classroom instruction. The CCCE is headed by former deputy prime minister John Manley and represents more than 100 chief executive officers.

The CCCE has taken an interest in education issues, and it says the report was commissioned as part of its efforts to improve education and skills training in Canada.

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The report dismisses the idea of merit pay, a controversial program that rewards teachers for rising test scores. But it does question the current salary model, which is based on seniority and academic credentials. The report argues that it does not offer any financial incentive for teachers to become more effective in the classroom.

"Beyond the first few years of teaching, when effectiveness does appear to increase, there is no obvious reason why teachers should receive automatic yearly pay increases – and why a lazy and ineffective teacher should be paid the same as a hard-working, dedicated and effective teacher," writes Sachin Maharaj, the report's author and a high school teacher at the Toronto District School Board. "Excellence goes unrewarded, mediocrity goes unaddressed."

The average starting salary for teachers in Canada's public school system is about $45,000. The highest-paid teachers can earn as much as $100,000 annually.

Teachers are generally evaluated every few years by their school principals, but their salaries are not tied to those evaluations. The report says that at minimum, teachers should be evaluated every two years and those evaluations should involve not only the principal, but a third party. Student feedback should be incorporated into the evaluation. Teachers with excellent evaluations would then progress more quickly through the salary grid, while those with poor marks would not get increases, Mr. Maharaj said in an interview.

He also recommends that the profession incorporate different categories with greater responsibilities and higher pay at each level. A teacher in a higher category, for example, would have more responsibilities, such as providing remedial help to students or mentoring other teachers.

Mr. Maharaj acknowledged his recommendations are contentious, but he said it is necessary to make the system more accountable. It would also change the culture of teaching, he said, to a "high-performing, high-status profession."

"If you have the salary grid that is at least in part tied to your actual performance, it can be encouraging and motivating to teachers," Mr. Maharaj said.

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The recommendations are unlikely to materialize in Canada's public school system. School boards, teachers' unions and governments generally do not support linking pay to performance.

Bob Pratt, president of the Ontario Principals' Council, said that unlike the private sector, teachers don't enter the profession for the paycheque.

"In my experience, teachers get their satisfaction from seeing kids succeed. I'm not sure that offering more money will necessarily motivate people," he said. "In our view, financial incentives are the wrong tool in this culture."

Sam Hammond, president of the Elementary Teachers' Federation of Ontario, said teachers are constantly upgrading their skills so they can be more effective in the classroom. Evaluations are subjective, and should not be linked to pay, he said.

"This person makes it sound like people that are being hired into these positions are not effective teachers or that after a few years, they lose their effectiveness as a teacher. That's a bunch of nonsense, because teachers carry on their professional development on an ongoing annual basis," he said.

Mr. Hammond added: "Look at what's happening in the United States with these kinds of programs and the divisions it has caused. I think it's a bad idea for publicly funded education systems in Ontario."