This study explores teachers' reactions to a knowledge- and skills-based pay (KSBP) system implemented in a large international school. Such systems are designed to set teacher compensation based on demonstrated professional knowledge and skills as opposed to the traditional scale based on years of experience and degrees attained. This study fills a gap in the research into the reactions to KSBP of highly qualified teachers in a school with high-achieving students and in a competitive market in which the best teachers can choose which schools and countries to work and live in next. Based in expectancy theory (Vroom, 1964), a survey and focus group interviews were used to solicit teacher perceptions and reactions to the system. Exploratory factor analysis confirmed alignment of survey items with theory, and hierarchical multiple regression, bolstered by qualitative analytic induction (Patton, 2002) showed a significant relationship between teachers' perceived impact on their work and implementation issues (fairness, accuracy, and qualified evaluators) on their reactions to the system. Though teachers generally understood the system and agreed with the evaluation standards, the tie to pay was criticized, and teachers did not feel they received enough direct feedback to grow professionally except through their own intrinsic motivation. Teachers' perceptions showed that the system was not motivating overall, though almost everyone received a pay raise. Age was the only significant predictor of motivation, with the oldest teachers reporting least motivation. Finally, no significant difference was found between teachers who had completed the system and those who had not in their intention to return to the school. Overall, implementation issues were more connected to teacher reactions than design issues. The findings indicate that the leverage point for such systems is an increase in perception of professional growth rather than increased pay, followed by assurances that the system is fair and accurate. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]