The NSW government has declared the public sector wages cap dead after the union representing public sector workers agreed to a 4 per cent salary increase for employees.

The agreement, reached in the Industrial Relations Commission on Thursday, means around 80,000 public sector employees will now get the 4 per cent pay rise, as well as a 0.5 per cent increase in superannuation backdated to 1 July 2023.

It’s the biggest pay increase for NSW public sector employees in over a decade, and also marks the demise of the wages cap, the government says.

Industrial relations minister Sophie Cotsis said the wage cap had undermined trust between public servants and the government, suppressed wages and created a staff crisis.

“The wages cap is dead,” she said.

“This will benefit the people that keep the state’s essential services like schools, prisons, and national parks up and running. The people of NSW deserve world class public services.”

The state government announced the pay deal in June, accompanied by the establishment of an Industrial Relations Taskforce led by former Deputy President of the Fair Work Commission Anna Booth and former President of the NSW Industrial Relations Commission Roger Boland.

The government has previously said the pay deal will be in place for a year while the taskforce works on a new framework to replace the wages cap.

The taskforce is due to report back to the government before the end of the year.

The proposed increase to pay and superannuation for essential workers is estimated to impact the NSW Budget by $618 million for 2023-24.