The University of Otago has cited difficult financial times as the reason it can only afford to offer university staff a pay increase of 1%, the Tertiary Education Union (TEU) says.
The university made the offer, which matched the inflation rate for the year until June, at collective bargaining with unions last week, TEU Otago University organiser Shaun Scott said.
He said vice-chancellor Prof Harlene Hayne told staff that tough financial times meant the university could not afford to offer more than a 1% pay rise.
Prof Hayne said at the meeting the offer was made in the context of government funding not meeting growing costs at the university, Mr Scott said.
The initial offer made by the union was for a 3.5% salary increase and the improvement of several conditions, including relating to workload issues.
The union was yet to formally respond, but there was concern that salaries were "standing still" when compared with inflation.
If pay rates did not increase, this could affect the university's ability to attract and retain quality academic staff, he said.
The union would formally respond to the offer at the next meeting on August 16.
Otago University director of human resources Kevin Seales said the university did not wish to comment while negotiations were in progress.