Council pay bills have been slashed by more than 5% over the past year in England and Wales, saving taxpayers around £1.4 billion, according to figures released today.
The Local Government Association said the reduction in gross annual paybills from £26.3 billion to £24.9 billion amounted to 9.7% when inflation was taken into account.
Most of the savings came from pay restraint, cuts in overtime and a 214,000 reduction in the overall number of council employees since December 2010, said LGA workforce board chairman Sir Steve Bullock.
But he warned it would be "impossible" to deliver further savings on the same scale without deep cuts in staff, which would require large numbers of compulsory redundancies and a "big negative impact" on frontline services.
So far, the bulk of job cuts have been through voluntary redundancies and not replacing workers after they retire or move on, though there have been a "significant" number of compulsory redundancies, said Sir Steve, who is mayor of the London Borough of Lewisham.
Some 90% of councils cut top management costs by employing fewer people in senior posts or paying them less, while 79% reduced the cost of middle managers.
Sir Steve said: "Slicing £1.4 billion from the paybill hasn't been easy.
"Pay restraint and more efficient work practices have helped but the big saving has come from reducing the workforce, which we have been able to do largely through voluntary redundancies and not replacing workers when they retire or move to jobs elsewhere.
"It will be impossible to deliver the same savings again without another big reduction in the workforce which will inevitably involve a much higher proportion of compulsory redundancies.
"Frontline services will be hit and some of the services residents currently expect their council to deliver will have to be wound down.
"The frontloaded 28% cut in the funding councils receive from government is far larger than cuts faced by almost every other part of the public sector, including Whitehall departments. With the adult social care system dangerously overstretched and the country's roads in need of a £10 billion upgrade, similar cuts in the next funding period will have a big negative impact on the services councils can provide to residents."
Today's Local Government Earning Survey showed the basic local government paybill in England and Wales, excluding teachers, fell by 4.7% to £23.9 billion for the financial year 2011/12 from £25.1 billion in 2010/11 - a real-terms decrease of 9.2% when inflation is taken into account.
The gross paybill, which includes overtime and bonus payments, fell by 5.2% (9.7% in real terms) to £24.9 billion from £26.3 billion in 2010/11.