Birmingham City Council is offering loans of up to £20,000 to staff who have been hit by the abolition of overtime and special shift payments.
But the largest handouts from a hardship fund must be secured against property, putting employees’ homes at risk if repayments are not made.
The interest charged will be lower than high street rates, but the council is expected to more than cover its costs from the initiative.
The mini-mortgages have been approved by Tory cabinet member Alan Rudge as a means of helping workers facing pay cuts of up to 20 per cent.
More than 5,000 staff stand to lose money when new contracts are imposed scrapping payments for night shifts and weekend working.
Most of those affected will be up to £5,000 a year worse off, but about 130 employees face cuts of between £10,000 and £20,000.
The loan scheme was described as a “slap in the face” for the workforce by a trade union leader.
Rob Johnston, West Midlands campaigns and communications officer for Unison, accused Coun Rudge of encouraging staff to get into debt.
Mr Johnston added: “This is just a sticking plaster over a gaping wound.
“What the council should be doing is paying its employees appropriately for the work they do. Families are hard-pressed enough at the moment, the last thing they need is more debt.”
The loans are repayable over a maximum period of 10 years at an interest rate set by the Public Works Loan Board, currently about six per cent.
New terms and conditions for about 25,000 council staff, called the Birmingham Contract, are designed to modernise employment practices by scrapping a 50-year-old structure of expensive allowances paid to anyone asked to work non-office hours. The changes will save the council £10 million.
But the unions point out that some of the lowest paid employees will be hit the hardest. Among those set to suffer the most will be home carers on a basic wage of about £15,000 who could lose an average £2,254 in weekend pay.
Mr Johnston said: “These are poorly paid workers and the council should recognise this and revisit the Birmingham Contract, fund it properly and make sure people are paid appropriately.”