The Transport Workers Union has postponed a planned strike on garbage collection planned for Friday, giving negotiations one last chance.
The drivers, employed by government contractor Suez and represented by the Transport Workers Union, walked off the job on Monday and Tuesday in Canberra's south from Weston Creek to Tuggeranong.
TWU secretary Klaus Pinkas said he was confident the issue could be resolved through negotiation.
He said the strike action had been postponed – rather than cancelled – and would be rescheduled should negotiations fail.
"The main issue for us was a drop in severance pay and the government has met that requirement, but the pay offer is still below 2 per cent a year," he said.
He said severance pay had been dropped from three week's pay to two when the contract changed hands two years ago, despite assurances from the ACT government that this would not happen.
Drivers walked off the job in 2014, but Mr Klaus said his members were more willing to launch industrial action this year.
"Last time the employees were on new contracts and probation, which meant they were extremely reluctant to take industrial action," he said.
Municipal Services Minister Meegan Fitzharris said she would meet workers and union officials on Thursday to see how the government could help end the dispute with the contractor.
"It's disappointing that 40 per cent of the ACT has not had their rubbish collected this week, but TAMS are working to make sure alternative arrangements are in place for residents impacted," she said.
"Temporary drop-off sites are available within suburbs impacted by the industrial action this week. Other contingency measures are also in place, and people affected can drop off their waste at the Mugga Lane and Mitchell Resource Centres for free until June 3."
ACT NOWaste director Michael Trushell said more than 70 tonnes of rubbish had been dropped off at temporary sites since Monday.
"We have been flexible with the amount of rubbish you can take because some people have taken all the waste from their street out of community spirit," he said.
"If we keep going at this rate, close to one quarter of waste normally collected by the truck drivers will be dropped off."
Mr Trushell said drivers had legal access to protected industrial action until June 8 so further industrial action in coming weeks was still possible.
"We encourage residents to continue to be mindful of their waste generation over the next couple of weeks," he said.
"By minimising the amount of waste created, people may be able to help their friends, family or neighbours by offering them any room they have in their bin to dispose of excess waste."
Last week, Suez's ACT manager Jason Stewart said he did not believe further strike action was necessary as it could see "waste left in the streets for over a week".
Mr Stewart has previously said Canberra's garbage truck drivers were some of the best paid in the industry, earning on average $95,000 a year.