State Services Minister Tony Ryall has told public service chief executives any pay increases for staff will have to be met within existing budgets.
Labour says that amounts to a pay freeze across the public service.
Mr Ryall yesterday released the Government's Expectations for Pay and Employment Conditions in the State Sector which set out expectations that pay changes not lead private sector pay, be value for money and be made in consultation with the State Services Commission. There are about 45,000 state sector staff.
Labour MP Grant Robertson said that amounted to freezing public sector salaries.
"And in some cases, where departments are looking at big budget cuts, pay cuts," he said.
"Chief executives are being given the message, reduce salaries or cut jobs."
Mr Ryall said the SSC would hold chief executives to account for meeting expectations in their performance reviews.
Crown entities were expected to keep their responsible Minister informed about proposed actions not in line with the expectations.
Mr Robertson said executives could show leadership and restraint in tough economic times rather than penalise front line workers.
Mr Ryall said this morning that the public sector had to recognise the pain the private sector was facing.
"We're entering quite a difficult economic period, everybody from families to communities to businesses are [sic] tightening their belts and we're saying to the public service chief executives pay conditions are going to have to be negotiated within the resources they have."
Mr Ryall said pay increases had been met within baselines before and some people would still get pay rises.
"They (chief executives) have to make sure that doesn't flow through into greater pressure in the private sector."
Maximum levels of leave have been set.
Mr Ryall also said the Government would drop two pay and employment equity investigations - considering why female social workers at Child, Youth and Family are paid 9.5 percent less than their male colleagues, and inequities in female school support workers pay - because they would cost too much.
However, departments were expected to continue to address equality issues as part of being a good employer.
Mr Robertson said National was saying pay equity for women was unaffordable.
"Labour supports getting value for money in the public sector, but what we've seen from National today on pay freezes and earlier in the week with public sector job cuts is an assault on state sector employees."
National was hypocritical as it was paying more than a $1 million on 10 media advisors, he said.
The Public Service Association national secretary Brenda Pilott said the moves were negative and showed the Government did not want to fix pay equity problems.
Meanwhile Environment Minister Nick Smith told the New Zealand Herald job cuts were inevitable if the ministry was to keep within its 2009-10 budget of $56 million set by Labour - down from $75 million in the 2008-09 year.
Dr Smith said it was too early to know how many jobs would go or which programmes would be cut. But spending priorities would include climate change, work on water issues and waste management.
"The previous Government has left a huge hole in the environment budget with the ministry facing massive cuts. The irony is that at the very time they were campaigning on sustainability their plans were to cut the ministry's budget by a third," he said.
Labour's environment spokeswoman Nanaia Mahuta said the Government was blaming Labour to divert attention from its own back-tracking.
"National has consistently said it would cap the public sector and that means no job losses. So for Nick Smith to say there will be job losses is at odds with what was promised."
NZPA