Auckland City Council says there will be no provisions in its budget for staff salary increases, effectively putting a freeze on the pay packets of workers.
The decision was sent in a memo to councillors from the council's chief executive David Rankin on Wednesday.
In the memo, Mr Rankin says the move is significant and not one that was made lightly.
It is hoped the salary freeze and other cost savings can limit the next rates increase to 2%.
Public Service Association national secretary Richard Wagstaff says the council should not have acted without consultation.
The PSA represents more than 500 council workers.
City councillor Cathy Casey has described the move as immoral.
The council employs about 2,300 full time equivalent staff.