THOUSANDS of council workers in Southampton will have their pay restored under a proposed deal to end a long running industrial dispute that saw rotting rubbish litter the streets last summer.

But the move will see thousands lose compensation, which opposition Tories say was promised by unions in legal claims against the council.

Union leaders are urging members to accept the “breakthrough” proposal in a postal vote starting next month.

It follows weeks of negotiations with Labour council leaders, who promised to restore staff pay cuts of between two and 5.5 per cent brought in last July by the Conservatives.

The Conservatives last night questioned how the deal will be funded and warned it would cost jobs.

Under the new plan all 2,143 council workers earning between £17,501 and £35,000 a year will see pay fully restored by April 2014.

The 865 staff earning between £17,501 and £22,000 will have a two per cent pay cut reversed in November.

Some 396 higher earners on £35,001 to £65,000 would get a 1.8 per cent cut restored from April 2014, with the remainder dependent on savings to be found.

Unions said no job losses are linked to the deal, which will cost the council £2.3m with a further £500,000 to be found from a staff suggestion scheme.

Senior managers and top executives on over £65,000 will not see pay restored until after April 2014 - unless the savings are found.

Unions would in return withdraw a legal action for up to £12m in compensation for the 4,000 staff they claim were not properly consulted over the council's plan to dismiss them if they did not sign up to worse contracts.

And union legal support for around 1,000 individual unfair dismissal claims would also be dropped.

Council staff had been told they could be awarded up to three months salary each in compensation and Tory chiefs had set aside hundreds of thousands of pounds to pay for the claims, fearing they would lose.

Some additional holidays given to staff as part of the pay cuts package would also now be withdrawn.

Unison branch secretary Mike Tucker said the proposed deal showed the previous Tory administration didn't need to cut pay to save services.

“Council workers can now concentrate on providing first class services to the people of Southampton ,” he said.

Unite convenor Mark Wood added: “This breakthrough marks a substantial change in culture.”

Cabinet member for resources Councillor Simon Letts said: “The deal we have put together with the unions will be a real boost for morale and staff retention and shows just what can be achieved when councils are prepared to engage with their staff.”

Conservatives brought in cuts to staff pay, terms and conditions last July in a bid to make budget cuts and protect 400 jobs.

Group leader Royston Smith said: “It is very underhand to present this as good news to staff and ask them to vote on it, then a month later reveal to them exactly what it costs to pay for it in lost jobs and services.”

A postal ballot of union members will be held between September 14 and October 5.