The Solomon Islands government has given in to a strike threat by public sector employees and awarded pay increases in line with last year's order by the Trade Disputes Panel.
The cabinet has agreed to backdate a 2-point-5 percent pay rise to January last year and it also approved a cost of living allowance of eight percent backdated to 2002.
The government and the unions are today due to sign off the increases in a memorandum of understanding.
The deal came after the state sector employees stopped work at midday yesterday, prompting an urgent cabinet sitting to approve the increases.
The backpay is to be paid next month while cost of living adjustments are to be released in April.
The budget, which had been re-drafted with the assistance of Australian officials, makes no provisions for pay rises.