Public Service Minister Michaelia Cash says public servants at her Employment Department, who have voted to reject a fresh pay offer, will not be getting a better one.
Senator Cash said the deal, rejected by a narrow 55 per cent 45 per cent margin, was the best possible offer the department could have made.
The margin of defeat,was much closer than last year's crushing rejection of an offer made under the hardline policy pushed by Senator Cash's predecessor, Eric Abetz.
Environment Department employees have also voted to reject a 2 per cent pay offer by a margin of 63 per cent to 37.
A no-vote at IP Australia last week came on the heels of public servants at the Finance and Foreign Affairs Departments agreeing to accept a deal offered under the government's softened bargaining policy.
Despite the improved pay offer on the table at Employment, of 2 per cent per year for a three-year deal, it is understood that cuts to conditions and entitlements remain key sticking points for many of the department's public servants.
Senator Cash said the rejected offer was the best possible one for the Employment Department's 1400 public servants and that she was disappointed that it had been knocked back.
"It is disappointing that the recent vote was unsuccessful in securing pay rises in the Department of Employment," the minister said.
"As the department outlined prior to the vote, this was the best possible offer they could make.
"The government remains committed its bargaining policy."
The Community and Public Sector Union seized on the result at Employment on Tuesday as evidence the revised policy was doomed to fail.
"Minister Michaelia Cash is now in the embarrassing situation of having her own agency twice reject unfair enterprise agreements, despite a well-resourced and aggressive campaign by management," the union's national secretary, Nadine Flood, said.
"Coming on top of last week's strong result in IP Australia, it's time for Minister Cash to accept that the government's bargaining policy is still broken and needs to be fixed."
Attention will now turn to the massive vote underway at the Australian Taxation Office.
With the ballot due to close on Wednesday, ATO bosses were urging their public servants to vote, noting on Monday afternoon 40 per cent of eligible employees had not voted by that point.
"Please make sure you vote so that the outcome reflects the opinion of the majority of ATO employees," wrote Second Commissioner Geoff Leeper.
Correction: An earlier version of this story incorrectly stated that only 40 per cent of eligible employees had voted in the ATO's ballot by Monday afternoon. Sixty per cent of eligible employees had voted by that point.