A police pay deal that will save about £150 million a year was approved by the Home Secretary today.
Theresa May said there would be no reduction in basic pay and any extra payments would be focused on specialist staff and frontline officers.
But she admitted that some officers would be disappointed by the move.
Mrs May has clashed with officers since Tom Winsor's review recommended the biggest reform of police pay in 30 years.
Mr Winsor said more than £1 billion of savings should be made, with most of this being redistributed from officers with comfortable back office jobs to those on the front line.
Officers were "comparatively well paid", earning 10% to 15% higher than some other emergency workers and up to 60% higher than the average local earnings in regions such as Wales and the North East, he said.
The review's proposals would leave at least 40% of officers worse off, with the biggest losers having their take-home pay slashed by up to £4,000 a year.
But negotiators were sent to the Police Arbitration Tribunal (Pat) after failing to agree a deal.
The tribunal accepted most of the Winsor proposals, but changed several others.
It said competence-related threshold payments - often described by critics as "grab a grand" - should remain in place for those who already receive them.
And it also proposed that a premium rate of time and a third should be kept for casual overtime, a new £50 per night allowance for officers forced to stay away from home overnight while helping other forces should be brought in and that progression up the first three steps on the constables' pay scale should be excluded from the proposed suspension on police officers' pay scale.
All of the tribunal's proposals were accepted by the Home Secretary today.
In a speech on police reform in central London, Mrs May said: "After a thorough and considered review, Winsor provided us with the outline of what a modern police pay structure could look like.
"He produced a package that is fair to the police and that is fair to the taxpaying public - a package that can produce savings and improve incentives, that recognises and rewards specialist skills and frontline service, not just time served."
She went on: "The Winsor report has been considered by the independent Police Arbitration Tribunal, and I can announce today that I am accepting all of the tribunal's recommendations in full.
"I know that some police officers will be disappointed by this outcome.
"But I want to stress that there will be no reduction in basic pay.
"Extra payments will be targeted at frontline staff and those doing the most demanding work.
"And the total savings will represent less than 2% of the total police pay bill."
Mrs May added: "Policing will remain a well-paid job.
"And the fact remains that, if we hadn't taken this tough decision, we would have had to cut police budgets more deeply and there would have had to be more police job cuts.
"That is something that neither the police nor the public wants.
"Once the Pat's recommendations have been fully implemented, they will save around £150 million per year."
The Police Federation, which represents rank-and-file officers in England and Wales, said the deal will mean "serious financial hardship for police officers".
Paul McKeever, its chairman, said: "Let's not forget, this Government is unduly targeting police officers.
"In addition to what amounts to a four-year public sector pay freeze and increased pension contributions, police officers are having to contend with a range of changes to terms and conditions; the result of which is effectively a pay cut."
He went on: "The imposition of the pension increase is disappointing.
"Police officers not only have no industrial rights; on the issues of pensions they have no right to negotiate.
"Moreover, through constructive consultation, the police service is one of the few public services to have actually agreed a reform of their pension which has delivered a sizeable cost reduction."
Chief Constable Peter Fahy, the lead on workforce development for the Association of Chief Police Officers (Acpo), said the decisions "strike a balance between the need to achieve savings given the national economic situation and the financial pressures facing individual police officers".
"The two-year pay freeze combined with a two-year increment freeze, the removal of various bonus payments and the increase in pension contributions will have a significant impact on many staff," he said.
"It is right that those working unsocial hours should receive an additional payment.
"Over time Acpo would like to see a greater emphasis on recognising the considerable expertise of our staff in the pay system and a lesser importance on time served."
Derek Barnett, president of the Police Superintendents' Association of England and Wales, added that the deal "will draw a line under what has been a protracted and difficult period for police officers".
Shadow home secretary Yvette Cooper said: "The Home Secretary is still ducking the main issue, which is the 16,000 police officers being cut and the 20% budget cut as a result of her decisions.
"At a time when personal crime has gone up by 11%, the Home Secretary is out of touch with the problems communities face."
She admitted that Labour had said the Home Secretary should accept the deal, but accused Mrs May of leaving police morale "at an all-time low".