The parties could not agree on a pay deal after about a year of talks, so an independent arbitrator - employment law specialist Vicki Campbell - was brought in to decide which of the final offers would be adopted.
On Monday, the arbitrator was in favour of the government's offer, which includes a $1500 lump sum payment, a flat $5000 pay increase for officers, plus another 4 percent increase in July and again in 2025.
There will also be a 5.25 percent increase in allowances backdated to November last year.
Police Association members rejected a similar offer in April, saying it was nowhere enough and staff would leave in droves.
Earlier in July, members were furious after the union pulled back its offer in a bid to reach a settlement.
In an email to members seen by RNZ, the Police Association said it was disappointed.
"A recurrent theme in the arbitrator's decision is a need for Police to adhere to the government's fiscal constraints, and that appears to be have been a key determinant behind this outcome," it said.
RNZ has also seen an email from Police Commissioner Andrew Coster, who acknowledged the process was long and drawn out, and had left staff feeling frustrated and disappointed.
"While this may not be the decision that staff were hoping for, the independent arbitration process has found that the offer was fair," he said.
