Hundreds of low-paid workers will enjoy a bumper pay rise after a council reached an historic deal with unions.

Redcar and Cleveland Council has become the first local authority in the North-East to sign a deal for single status for all staff.

The pay increases - which will be followed by similar agreements across the region in the next 12 months - will benefit 3,900 of the council's lower paid staff in jobs such as cooks, cleaners and home care staff.

It will cost the council £3.5m for one-off ex-gratia payments for "hurt feelings" over perceived sex discrimination and a further £1.8m to fund the new pay deals - which will result in a 4.5 per cent increase in this year's council tax bills.

The council has made written lump sum offers of up to £6,000 to 2,600 women and a small number of men, and the annual rises range from a few hundred pounds up to £5,000 - as much as 40 per cent on the previous basic wage.

John McCormack, Unison's Redcar and Cleveland branch secretary and secretary of the Joint Trade Unions, signed the deal with Coun Glyn Nightingale at Eston Town Hall today.

Mr McCormack said: "We are extremely pleased for the majority of our members and in the present financial climate we have struck the best possible deal."

Coun Nightingale, the council's member for corporate resources, added: "This is a proud and historic day for the council and the most important outcome of any decision yet taken by the new coalition administration.

"We are at the forefront of councils nationwide with this groundbreaking settlement."

Council officials have spent four years - and £400,000 - carrying out a detailed analysis of jobs and pay structures to identify those whose salaries are not as high as they should be.

But the review also identified 1,600 posts where pay rates should be reduced, but the staff affected - mainly clerical grades - will have their salary protected for three years before moving onto their new levels.

Coun Nightingale added: "Seven out of ten among our lower paid staff will benefit from higher pay.

"Dealing with the remainder is a delicate issue and w are committed to doing all that we can to treat affected staff with sympathy and support during the adjustment process."

A further 140 workers have lodged equal pay claims at an employment tribunal, but the offer of ex-gratia payments is still open to them and officials hope they will accept rather than risk a settlement in court.