More than 4,000 people work at the Vatican
The Vatican says it has decided to give financial rewards to employees who are doing a good job.
It says it will take into account issues such as "dedication, professionalism, productivity and correctitude" when awarding a pay rise.
It says that "this novelty brings an element of incentive and remuneration into the Vatican salary system".
More than 4,000 people, from cardinals to cleaners, work at the Vatican - the world's smallest state.
Base pay across a broad spectrum of jobs reportedly ranges from 1,100 euros (£791; $1,634) to 2,200 euros (£1,582; $3,268) a month.
The new, corporate-style incentives are likely to require some careful book-balancing, the BBC's Matt Davis says.
Salaries already constitute the largest drain on the Vatican's finances - and its coffers are feeling the pressure of the falling value of the US dollar, our correspondent says.
The new pay system will begin in January.
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