Scottish First Minister Nicola Sturgeon and her SNP government have conceded to transport unions by helping fund a five percent rise to train drivers.
Nationalised ScotRail confirmed a "breakthrough" in negotiations with Aslef had been made, after its members forced 700 scheduled rail services a day to be cancelled over the past two weeks, after refusing to work overtime.
Better pay for working on rest days has been secured, the train drivers' union announced, alongside no compulsory redundancies for the next five years and an enhanced bonus scheme from the operator, which is expected to be worth at least another £2,340 per year.
Nicola Sturgeon has surrendered to pressure from transport unions issuing a five percent pay rise Russell Cheyne
The SNP's Transport Minister, Jenny Gilruth reiterated how she had not been party to the talks, Transport Scotland agreed to fund 2.2 percent of the rise to reflect the crippling cost of living crisis.
Unions representing nursers, police, teachers and council workers are likely to retaliate in the wake of the five percent pay rise, with many of their members earning far fewer than the £50,000-plus salaries paid to train drivers.
Council leaders across Scotland are said to be "deeply disappointed" with the First Minister Nicola Sturgeon and Finance Secretary Kate Forbes, following their refusal to intervene in the raging dispute over local government pay.
Cosla finance spokeswoman Gail Macgregor said the current budget settlement for local government “limits the options” for successfully resolving the dispute.
The announcement fell in the wake of Unison, the largest local government union in Scotland, started balloting 25,000 council workers over possible strike action.
Unison is balloting school staff, early years workers and refuse and recycling staff – with the warning that strike action could shut schools and nurseries and leave bins uncollected.
The union is recommending workers back such action after being offered a “miserly” 2% pay rise.
The Scottish union which represents council workers, GMB Scotland, said the fresh deal highlighted the "paltry" two percent pay rise offered by the Scottish Government to other public sector staff was neither "credible nor acceptable".
SNP Finance Secretary, Kate Forbes, announced plans for extreme pay cuts across the public sector, warning workers that there is little money for pay rises.
ScotRail warned of extensive delays to rail service in the 10 days post accepting a pay rise offer James Manning
Senior Organiser with GMB Scotland, Keir Greenaway said: "It's clear the only language our political leaders understand is action".
The Scottish rail union recently balloted its members for industrial action, set to occur later this month.
Mr Greenway added: "Credit to Aslef members for standing together and fighting for what they feel they are worth. Scottish government ministers can be assured that GMB members across local government are doing likewise to confront the cost of living crisis and to make work better."
The Scottish Government would suffer an irreparable strain on their finances if they provided public sector staff with any large-scale pay rises.
Expensive SNP pledges over welfare spending and stunted growth in tax revenues have meant that cuts will be required in areas such as education, local government and policing to balance the books.
ScotRail, described the offer as “good value for the public”, has previously announced it could take as long as 10 days for services to return to normal after a pay offer is accepted.
It will pay 2.8 percent of the basic pay rise with the remainder covered by Transport Scotland.
Basic pay for experienced train drivers will be increased by more than £2,600, taking the salary to £55,264, excluding the bonus scheme.