Royal Mail workers will receive a three-year pay rise worth around 9% and legally-binding employment protections under a "landmark" agreement.
The deal between the Communication Workers Union and the recently-privatised company, which has averted strikes, covers over 130,000 employees.
Royal Mail said the agreement was believed to be the first of its kind in the UK, giving legal protections that benefit workers and the company.
Workers will receive a 3 per cent pay rise, backdated to April, 3 per cent from next April and 2.8 per cent from April 2015, as well as a £200 lump sum paid before this Christmas.
Royal Mail has committed not to introduce zero hours contracts, will deliver future changes without compulsory redundancies, will make higher contributions to the pension scheme and will not undertake any additional franchising or outsourcing.
CWU deputy general secretary Dave Ward said: "The agreement breaks new ground in the UK by incorporating extensive legally binding protections for employees alongside a commitment to improve industrial stability.
"The legal protections for Royal Mail employees come hard on the heels of the privatisation of the company and are unprecedented in delivering the strongest protections for employees.
"This is a good deal for the company and customers as well as for employees, but investors should be clear that this agreement commits them to growth and there will be no tolerance to a race to the bottom on services and jobs."
Moya Greene, chief executive of Royal Mail, said: "I am delighted that we have reached an agreement in principle with the CWU. This will provide long term stability and certainty for Royal Mail, our employees and our customers at this pivotal time.
"Working together we can create a strong foundation for the continued success of our business."
There will be improved efficiency and a national review of workloads, and the introduction of mediation procedures to help resolve any industrial relations issues.
Royal Mail said there will be a new approach to resolving workplace disputes at a much faster pace and without disruption.
CWU members will vote on the agreement in a ballot next month.