Public sector workers earning more than $60,000 can only expect pay increases in "exceptional circumstances" while those on more than $100,000 won't get a cent more over the next three years, the Government says.
Last year the public sector was asked to have nil or minimal pay increases until next month.
The Government says the extended pay freeze is to reduce debt from the Covid-19 response, but the Public Service Association (PSA) says it punishes workers "after a year of sacrifice, hard work and success protecting New Zealanders from Covid-19".
The Government's Workforce Policy Statement, issued today, sets out its expectations for pay and employment relations in the public sector.
New Zealand had an "exceptionally successful health and economic response to Covid-19", Finance Minister Grant Robertson said, supported by the Government taking on debt for polices like the wage subsidy.
"As the recovery gets under way, we are keeping a close watch on the debt taken on during Covid-19 to support the economy," Robertson said.
"Just as businesses are making decisions as they plan for the recovery, our responsible economic approach means the Government is faced with choices about where new spending is targeted."
Public Service Minister Chris Hipkins said any increases would be targeted to lower-paid public servants, largely those earning below $60,000, who account for about 25 per cent of the public sector.
Those earning between that and $100,000 could expect increases only in "exceptional circumstances".
"We want to see those on lower wages be the focus of any increases in pay.
"This is about prioritising spending. The policy will also help protect jobs by taking financial pressure off the public wage bill."
The PSA, which represents almost 80,000 workers, said they felt "betrayed".
"In our hospitals, in testing labs and on our borders, PSA members did the hard work required to push Covid-19 out of this country," national secretary Kerry Davies said.
"It is unacceptable that after 12 months of pay restriction these workers are told to swallow it for another two years."
The median salary for a PSA member is $59,000 a year, and 80 per cent earn below $75,000 annually, Davies said.
Border and MIQ personnel have spent the past year under tremendous pressure, working above and beyond normal expectations.
The median salary for a Customs Officer is $59,000 a year. Biosecurity officers earn $63,000, quarantine officers $70,000 and immigration officers $53,000.
Government pay restrictions will be a tough pill to swallow for the border workers, and the many public servants who supported business owners and workers through lockdowns and their flow on effects.
"The Government can tell employers not to offer pay increases, but it doesn't seem able to limit increases in the cost of living," Davies said.
"Public servants are more likely to rent than most New Zealanders, and rents and house prices continue to skyrocket."
Hipkins said the measures would not affect work within the Public Service to close gender and ethnic pay gaps.
"The guidance is consistent with the decision last year by the Remuneration Authority that Ministers and MPs would not be getting pay rises for three years because of the Covid-19 economic environment," Hipkins said.
"The Public Service Commissioner, who sets the pay of Public Service chief executives, will also not be increasing their pay."
Asked what impact the freeze could have on higher-paid staff and potentially moving to the private sector, Hipkins the private sector too was experiencing pay freezes.
Public sector wages over the past few years had also outpaced the private sector, and this would allow it to "catch up", he said.
The Government was also "cracking down" on the use of what Hipkins called a "public consultant culture", he said.
"Where people are being brought in to do work where the public service should have capability to do internally it is unjustified. We are dialling that back."
Asked if having their wages frozen at $61,000 for the next three years was enough for someone with a family to live in Wellington or Auckland, and to even think about buying a house, Robertson said the Government had other measures to address those issues.
"With our Covid response we have borrowed significant money and need to show leadership in what we are doing so by the middle of the decade we can reduce our debt."