Hundreds of University of Auckland lecturers are threatening to take industrial action that could jeopardise millions of dollars of funding.

But they do so with a warning from the vice-chancellor who says it pays for about 700 jobs, so staff should think carefully before putting a "significant source" of funding at risk.

The union, which represents around 800 staff members, has reached a stalemate with the university after rejecting an offer of a 4 per cent pay rise which comes at the expense of certain core existing conditions.

Dr Kim Dirks, a senior lecturer at the university, said the employment agreement ensured entitlements to several important conditions - including research and study leave - could be changed only by mutual consent.

The university wants to remove those conditions from the contract and make them general policies which can be modified if needed - something tutors and lecturers are fearful of, especially in relation to research and study leave.

Dr Dirks says union members feel so strongly about keeping the conditions that they are happy to have no pay rise to keep the status quo, but the university is digging its heels in.

As a result, union members are now refusing to submit Performance-Based Research Fund reports, which the university needs in order to get millions of dollars of funding each year.

Vice-chancellor Professor Stuart McCutcheon said the university received about $70 million worth of PBRF a year.

The reports staff were threatening to withhold were needed for an evaluation next year so it might not have an "immediate effect".

Despite that, he warned it would be staff who ultimately paid.

"If, through protesting, the union was to put revenue at risk then it would be putting jobs at risk and one would hope they would think carefully about that," he said.

Professor McCutcheon said he understood withdrawing the conditions came at a price, which is why he has offered a 4 per cent pay rise and increased annual leave to five weeks. The same offer was also made to the 1100 staff on individual contracts and the vast majority have accepted it.

"The reason for wanting to remove the policies is primarily my view that universities, like any organisation, should be able to set their own policies without having them locked into an employment agreement."

Dr McCutcheon said suggestions he wanted to abolish research and study leave were "simply not correct".

"If one abolished research and study leave all of our top academics would go overseas ... it's just silly to suggest that any vice-chancellor would do that."

Tertiary Education Union national president Dr Sandra Grey said she was astonished Professor McCutcheon was not listening.

"His own staff are saying they will turn down money so that they can do their job the best way they can, and give their students the best education they can. The core conditions being defended by academic staff are not privileges or perks - they relate directly to ensuring quality education and research at the university."

* Policies relating to research and study leave, the academic criteria for promotion, discipline procedures and outside professional activities are covered by the employment contract and can be changed only by mutual consent.
* The university wants to remove them from the contract and make it general policy. It's offering a 4 per cent pay rise and increased leave.