HUNDREDS of staff at South Lakeland District Council have been asked to change their contracts to help the authority out of its financial black hole or face the sack.

The staff were reported to be "extremely upset and distressed" after receiving a personal letter at home this week from SLDC acting chief executive Mike Jones.

However, Mr Jones said he was "extremely disappointed" that employees had leaked a private letter to The Westmorland Gazette, and that he had gone to enormous lengths to communicate the council's position to staff.

The 450 employees are being asked to accept a freeze on the increments that they would have received under the council's ill-fated pay and grading structure, which was expected to cost the authority £1.6 million, or £1 million more than originally estimated.

Staff will, however, still receive the nationally agreed cost of living rises.

In the letter, Mr Jones told employees the council wanted to freeze the "incremental progression" until a new and revised grading structure could be brought in.

"I believe that the change is reasonable in the circumstances and especially as it is only until a new grading structure is implemented," he said in the letter.

"The £1 million deficit will start to impact on next year's budget and, unless we take action, will occur every year.

"The agreed pay and grading structure is not sustainable - there would have to be a 22 per cent increase in council tax to fund it and we have already spent the increased pay bill approved by the council in implementing the structure this year."

The letter states that staff were "invited" to agree to the change in their contracts by November 15.

If they decided against signing up, Mr Jones added: "it is with great regret that I have to inform you that, because the council has no reasonable alternative to resolve the short-term financial deficit other than to freeze the incremental progression, then council will have to consider whether it must end your contract of employment."

One SLDC employee, who did not wish to give his name, said he had felt forced to approach the Gazette in a "cloak and dagger" way to protect his position.

"There's a lot of anger and upset with the staff," he said. "If they said they have got to freeze it for one year until everything's sorted out, personally I would take a pragmatic view and say we understand there's a problem.

"But that (the letter) is open-ended potentially you are signing away all increments forever."

Unison branch secretary for SLDC Vivienne Procter said morale was "pretty low" among staff, and the union's 400 members.

"We were disappointed that they (the letters) had been sent out because we felt that we were in the middle of talking to the management.

"The consequences of that were that staff were extremely upset and distressed at the content and terms of the letter sent to individual members of staff it's a collective issue and the matter should be dealt with in a proper way."

She said Unison, which would be meeting with its members next Thursday, could not urge them to sign up to the proposal, because it was open-ended. Unison has already lodged a formal grievance with the authority about the freeze.

"We acknowledge that there's a problem and it needs to be dealt with, but it doesn't need to be dealt with this way," she added.

Acting chief executive Mike Jones defended the council, and said the letter, which was about "a delicate matter", was not for public discussion.

He said the authority had worked "extremely hard", through a series of meetings, and letters, to ensure that all staff understood why the council was taking the action outlined, and he was "at a loss" to know what more SLDC could have done.

The council had not been able to reach agreement with the trade unions over an alternative pay and grading structure, and had been left with no option other than to protect the council taxpayers, he added.

Mr Jones stressed that staff had already been paid £650,000 more than last year.

"I fully understand the disappointment, I fully understand the frustration - my staff here might not think I do but I do," he said.

"What's been explained to the staff is if we don't do that, the people who suffer will be council taxpayers, either through increased council tax bills or if we cut services."

He had told staff he intended the new pay and grading structure to be in place by April 1 next year, and that he did not make promises he could not keep.

Mr Jones said the council would try to prevent staff losing their jobs, which bosses did not want to happen.

After the discovery of the £1 million budget black hole in April, three senior members of staff, believed to be chief executive Philip Cunliffe, finance director Jack Jones, and human resources manager Andrew Taylor, were suspended. Mr Taylor has since resigned.

The council, which has not confirmed the three names, said the suspensions were "precautionary" and should not imply misconduct.