The NSW upper house has reversed the state government's controversial 12-month pay freeze for public servants.
MPs voted on Tuesday to disallow the pay pause which was introduced last week in response to the economic damage wrought by COVID-19.
The Berejiklian government had argued the freeze would guarantee jobs for public servants and free up funds for job-creating projects to support others who have lost work.
But the wages policy has been opposed by unions and frontline workers including paramedics, nurses, police officers and teachers.
Labor MP Adam Searle, who successfully introduced the motion to disallow the pay freeze regulation, said it was an "act of economic vandalism" that would cut the purchasing power of 400,000 workers in the state.
All it does is give more money to those with the security of a guaranteed job and a steady pay check while half a million go with nothing.
"Their spending underpins so many city, regional and rural economies. In some towns, public sector wages are the only wages being pumped into local shops," Mr Searle told parliament on Tuesday.
He said the freeze would not create jobs but instead result in more job losses.
"Cutting the pay of workers punishes the economy when we can least afford it."
But Finance Minister Damien Tudehope criticised the disallowance motion, calling it "a kick in the guts and a slap in the face" to those who'd lost their jobs due to COVID-19.
"All it does is give more money to those with the security of a guaranteed job and a steady pay check while half a million go with nothing," Mr Tudehope said.
The minister said many who'd hung on to their jobs had needed to take a pay cut.
"Our priority is creating jobs and keeping as many people in jobs as possible," the Liberal MP said.
The pay pause included a one-year guarantee of no forced redundancies for workers who weren't senior executives, and a proposed one-off $1000 stimulus payment.
The government is now expected to take it to the Industrial Relations Commission following its disallowance in the upper house.
Premier Gladys Berejiklian previously warned the $1000 payment would be off the table if that occurred - as well as the promise of no forced redundancies.
She said public sector jobs were at risk if Labor and crossbenchers blocked the pay freeze.
Australian Associated Press