A council has promised it will continue to pay staff "no less than the living wage" despite fears over its future finances.
City of Lincoln Council leader Ric Metcalfe said staff "deserve an increase" but it would put a squeeze on its budget.
The Labour-led authority is a Living Wage Employer.
"Just as households are facing up against it… so will organisations like ourselves," Mr Metcalfe said.
The national living wage is set at £9.50, however, like a number of other local authorities, the council pays staff what is known as the "real living wage" of £9.90 an hour, though a new rate is due to be announced on 22 September.,
Mr Metcalf said the council's "hard-pressed" staff "certainly deserve an increase because local government pay has been held down for years".
According to the Local Democracy Reporting Service he said the flat-rate increase of about 4.5% was "significantly higher than we were expecting or had budgeted for".
But he added: "We are a living wage employer and we continue to pay no less than the living wage to all of our employees."