The average salary in Cuba is about $20 (£10) a month
Cuba is to abolish its system of equal pay for all and allow workers and managers to earn performance bonuses, a senior official has announced.
Vice-Minister for Labour Carlos Mateu said the current system - in place since the communist revolution in 1959 - was no longer "convenient".
He said wage differentiation should improve production and services.
President Raul Castro has introduced a series of reforms since succeeding his ailing brother Fidel in February.
Writing in the communist party newspaper Granma Mr Mateu said workers would receive a minimum 5% bonus for meeting targets but with no ceiling on salaries.
Managers could earn a 30% bonus if the team working under them increased production, he said.
The minister pointed out that the current wage system sapped employees' incentives to excel since everyone earned the same regardless of performance.
"It's harmful to give a worker less than he deserves, it's also harmful to give him what he doesn't deserve," the newspaper article said.
Challenging Marxist orthodoxy
But the impact in terms of purchasing power will be limited, the BBC's Michael Voss in Havana says.
Raul Castro has brought in a series of gradual social reforms
The average wage in Cuba for everyone - from doctors to farm labourers - is about $20 (£10) a month.
Even before the recent sharp rise in oil and food prices Cuba was spending billions of dollars on imports, and that bill is likely to rise sharply, our correspondent says.
So far most of the reforms announced since Raul Castro took over the presidency have involved lifting restrictions such as the bans on mobile phones and computers.
The latest change is a more fundamental challenge to Marxist economic orthodoxy, our correspondent adds.