Public servants at the Immigration Department have been offered a new wage deal, but it comes at the cost of the jobs of 680 of their colleagues.
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The department wants to fund its pay offer of 3 per cent up front with 1.5 per cent for each of the two following years, by axing hundreds of more public servants.
The war of words between the department's bosses and the Community and Public Sector Union is escalating, with boths sides accusing the other of misleading and deceptive conduct.
Cuts to conditions, entitlements and allowances paid to former Customs officers who have moved to the new Australian Border Force also remain on the table, according to the union which says that some border officials will be left thousands of dollars worse off each year.
But the department has hit back at the CPSU's claims, with the Department of Immigration and Border Protection insisting that existing allowances would be "grandfathered" for workers who are already receiving them .
A department spokesman told Fairfax that the union was "misleading" its members with "straw man" arguments about cuts to conditions and entitlements.
The revised offer comes after workers at the 13,000-strong department voted, in a 91 per cent to 9 per cent landslide in September, to reject a lower pay deal.
The job-loss proposal is a significant escalation of a plan to part-fund the previous offer by culling 184 jobs and union negotiators say they were taken aback by the scale of the latest gambit.
It is unclear what areas of the massive merged department department would be targeted for the job losses, should the proposal be carried in a ballot of the workforce.
But the Community and Public Sector Union's national secretary, Nadine Flood, said the plan to fund a pay rise through the loss of nearly 700 jobs was "ridiculous".
"This attempt to slash nearly 700 jobs is outrageous and shows just how ridiculous the government's funding of Immigration and Border Protection is, if the department has to cut this many jobs just to get closer to maintaining existing pay.
These cuts would amount to 5 per cent of the total workforce, in a department that's already struggling to deal with rapidly growing international passenger and freight numbers.
"This department was under-resourced even before this ugly dispute began 18 months ago."
The departmental spokesman said the union was not being truthful in its position on allowances and conditions.
"The offer provides new allowances and grandfathers many existing allowances, protecting our employees' take-home pay," he said.
"The CPSU is trying to distort the fact this is a much improved offer with exaggerated claims and straw man arguments of 'deep cuts' and many of our staff 'having thousands of dollars slashed from their take-home pay' which are simply untrue.
"The package of employment terms and conditions being proposed includes grandparenting arrangements specifically designed to protect take-home pay for current recipients of other allowances not proposed to continue under a new Enterprise Agreement. "
