Performance-pay as an educational policy is currently discussed both in research and in public debate. The principal agent theory application to an education system views teachers as more altruistic than opportunistic, and therefore affected by intrinsic rather than extrinsic motivations. An extensive amount of research has been published on the performance-pay models in education; however, less attention was given to the educators' perceptions towards performance-pay. The current study aims to explore the question of performance pay from the point of view of the Israeli educators. The results reveal Israeli educators are in favour of performance-pay. Moreover, they perceive performance-pay as effective in reshaping students' achievement distribution. Furthermore, the design of rewards systems by merit pay was perceived as less beneficial for improving students' achievement distribution. Finally, educators perceived performance-pay designed as rewarding an individual teacher for the improvement gained in her individual student's performance as the most effective design.