THE Post Office has confirmed that it has reached an agreement with the Communication Workers' Union (CWU) over a pay increase for public sector workers.

It follows months of lengthy and detailed discussions over pay following a public sector pay freeze as set out in the budget speech in 2010 and again this year.

The agreement described by the Post Office as a "complex settlement" will see a headline increase of 3.5 per cent in basic pay.

This will be funded through the reallocation from ancillary payments within the existing payroll costs and changes to working practices which provide the business with improved operational productivity.

As a result of the change the Post Office has said the overall workforce will reduce through natural wastage and voluntary redundancy.

Mike Kelly, the chief executive of Isle of Man Post Office, said: "I am pleased that this dispute has now been settled within the constraints of the public sector pay freeze and removes the uncertainty faced by our customers and staff.  

"We continue to have a strong relationship with the CWU to develop the new products and services required for a modern postal service."

The new agreement covers the financial years of 2010/2011 and 2011/2012 and is effective as of April 1, this year. Discussions regarding the 2012/2013 pay deal will start in April next year.