More than 400,000 of the state's public sector employees are being offered a 10.5 per cent pay rise over three years, including a mandatory increase in their superannuation payments.
The move will give certainty to frontline workers, the government says, although bargaining has only begun on the deal.
Unions and agencies will have to consider the policy to cover workers under more than 70 awards.
NSW Treasurer Daniel Mookhey says the deal will cost $3.6b but is accounted for in the last budget. (Dan Himbrechts/AAP PHOTOS)
The deal would cost about $3.6 billion but was accounted for in the last budget's essential services fund, Treasurer Daniel Mookhey told reporters on Monday.
"We can afford to make this investment because we are paying our creditors less and as a result we can pay our essential workers more," he said.
But Unions NSW, the peak body for the state's worker organisations, immediately criticised the offer - which it described as being worth 9.5 per cent without the mandatory super increase.
"The NSW government's proposed minimum increases for public sector workers will not assist in retaining existing staff, nor enable us to attract the workers we desperately need to fill ongoing essential service vacancies," secretary Mark Morey said.
The wage offer falls below pay demands from unions representing some key workers, including firefighters and nurses.
Others such as teachers have secured large, one-year increases but are yet to negotiate longer-term agreements.
Premier Chris Minns said it was an appropriate offer that represented a real wage increase for public-sector workers.
"Pay and conditions for frontline workers is a priority for the state," he said.
The offer includes an annual $1000 "cost-of-living protection payment" to be distributed in the event that inflation tops 4.5 per cent in a year.
The last state budget predicted Sydney consumer prices would rise 4.75 per cent in the current financial year, but the key inflation measure would drop to 2.5 per cent by 2026/27.
Mr Mookhey said the state was sharing the risk of inflationary shocks with its workers as it moved them into three-year agreements.
Inflation was not expected to go above the 4.5 per cent rate that would trigger the protection payment, he added.
The state Labor government has been working to fill worker shortages in a range of sectors after lifting the former coalition government's 2.5 per cent wage cap, which it says was a major obstacle to recruiting more frontline staff.
Industrial Relations Minister Sophie Cotsis said the offer was part of her government's work in rebuilding essential services.
"This baseline offer lays the foundation for a fairer system for workers and their families in NSW," she said.
The Industrial Relations Commission will also be on hand to assist when negotiations get stuck.
"We don't want an adversarial process ... it's a collaborative process, it's a process of bargaining," Ms Cotsis said.
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