Council chief executive Jim Harland, who earlier this year received a $17,000 increase, taking his salary to $352,000, yesterday confirmed the cuts, news of which was leaked to the Otago Daily Times.
He said the initiative was a result of changes in the employment market.
An employee, who asked not to be named, said staff were "disappointed about it, more than anything".
Mr Harland said the cuts were the result of a review of attraction and retention premium payments, which were paid to attract and retain people in positions where there may be "great demand" for skilled staff.
It was cheaper to add the payment to salaries than to lose staff, and have to recruit more.
Asked how many would be affected by the review, Mr Harland said 53 council employees received such payments.
He was not happy the matter had become public.
"I'm disappointed that staff wish to negotiate through the media."
He said he would have thought whoever was unhappy with the matter would have negotiated with their senior manager, and if they were still unhappy, "come to me".
But the staff member who contacted the Otago Daily Times said yesterday, while it might have been possible to talk to management, that would not have amounted to negotiation.
The employee said the cuts came to about $30 a week and affected staff were unhappy about it.
A letter they received said the attraction and retention allowance of about $10,000 was not fixed and would be reviewed again next year.
Mr Harland said if average market wage rates rose or fell, so did the payments.
He said staff were aware when they took their jobs the payment was not an entitlement.
The staff member, though, said staff generally understood the payments to be "part of the salary", and were now faced with the possibility they might lose a further "large chunk" of their pay next year.
Asked if there had been cuts in the past, Mr Harland said individual payments had been reduced before.
"Everyone is subject to an annual salary review."
Mr Harland said the salary component of staff pay had increased in the past two years.
Asked whether staff might feel it was unjust they should receive cuts when he had recently received a $17,000 increase, Mr Harland said he could not answer the question, but could say his remuneration was below the median for chief executives in a council the size of Dunedin's.
The staff in question were above the median, while others in the local authority were not.
A spokeswoman from the Southern Local Government Officers Union said she was unaware of the cuts.
