Education secretary Estelle Morris announced a salary increase of 3.5% for all teachers and improved pay for better performers after five years instead of the current seven.
The recommendation from the school teachers' review body will give those outside London a starting salary of£17,628 and those working in London£20,733. That sum rises to a potential£25,746 and£28,581 respectively after five years.
Ms Morris also announced more flexibility for school governing bodies in setting head teachers' salaries to allow them to pay more for top candidates.
Together with the increased pensions contributions and restructuring of pay awards the rise is equivalent to more than 5%, he said.
'Once again the government has failed to recognise the extreme difficulties authorities will face,' he said. 'The government only allows 2.5% for pay increases. Unless it provides more money, schools will not be able to deal with the increasing demands on them.'
He said councils would be asking Estelle Morris for a specific grant to fund the rise. 'Kenneth Clarke set a precedent for it when he paid a specific grant in 1992,' he added.
The Local Government Association Conservative group suggested the Department for Education & Skills use the underspend in its budget to bridge the gap.
Doug McAvoy, general secretary of the National Union of Teachers, said the government's recommendations went part of the way to recognising the problems of teacher recruitment and retention, but not far enough.
'Particularly welcome is the decision to reduce the time it takes to reach the top level for classroom teachers. But the government has done too little to prove to teachers it has sufficient regard for their work,' he said.
David Hart, general secretary of the National Association of Head Teachers, said he was 'underwhelmed' by the award, although the improved flexibility for heads' pay was a 'step in the right direction'.