CITY of York Council chiefs today admitted the council could face "substantial" job losses and strike action as it tries to find an estimated £3.5 million needed for a pay review.

The review could lead to more than 4,000 workers getting a salary hike or suffering a wage cut. Council bosses have set aside £120,000 to set up a project team to spearhead the review.

Council workers said they feared the money would go to management while the "little people" lost their jobs.

The council already pays £80 million a year in wages, but has been told by the Government it needs to review thousands of salaries to bring them in line with those of neighbouring authorities.

Its leader, Steve Galloway, admitted he was concerned about the possible financial consequences, but said his aim was to freeze the Guildhall wage bill.

He said budget restraints meant York council simply could not afford to fork out the £3.5 million the Government believes should be set aside over three years for the review.

Refusing to rule out service cuts or job losses, he said: "If, for any reason, the results of the job evaluation cannot be contained within the existing pay bill, then we will have to look at either discontinuing some services or providing services in another way in order to maintain our budget strategy. It is my hope and expectation that we will be able to find a package which justly rewards staff, and provides value for money for council taxpayers, without introducing the prospect of substantial job losses."

If the £3.5 million must be found through job losses it could be equivalent to up to 200 posts.

One council worker, who asked not to be named, said the authority had been polarised over the issue. "It went down quite well in our section where wages have been lower," she said.

"We thought it would mean that we would get a rise. Then we realised other people would be made redundant, so it seemed a bit unfair.

"People think that management will get money and all the little people are going to get the sack. They are calling it restructuring and it is a bit scary."

But Coun Galloway stressed the council did not know what the result of the wide-ranging wage evaluation would be.

"It is my hope that the effects on most staff gradings will be limited," he said. "This could mean no changes to individual pay, changes of a few hundred pounds per year or more significant realignments - but we will have to wait and see."

Simon Wiles, director of resources, said it would want to limit disruption, but it was likely "a significant number of staff" might enjoy wage hikes - or be hit by pay cuts.

He said the review strategy would be to:

Keep costs down

Avoid strike action

Reduce the potential cost of £3.5 million by negotiating a smaller deal with unions.

But he warned that if the wage bill spiralled the council might have to reduce staff in some areas.

The council might also have to cut services.

The pay shake-up has been launched in an attempt to fend off inequality claims from staff.

Union chiefs urged the council not to touch long-standing bonus payments, given to workers like binmen and street cleaners, which the authority is hoping to phase out.

Peter Household, of Unison, said he was concerned about talk of job cuts.

He said: "I'm surprised that council officers have adopted these positions in public at such an early stage in negotiations."

He was looking forward to continuing negotiations and there were "many crucial things" to be agreed.

Updated: 11:46 Saturday, May 28, 2005