NHS staff face "another year of financial hardship", unions have said, after the government announced that the majority of health service workers would receive a 1% pay rise from next month. The rise – less than half the current CPI inflation rate of 2.7% – means staff are in effect having their pay cut following two years of pay freezes, unions said.

Around 60% of NHS employees covered by the "agenda for change" contracts will be receiving a 1% rise, the government said. This includes nurses and paramedics, who currently earn £21,176 a year, and healthcare assistants, porters and maintenance staff, who earn just over £14,000.

Meanwhile, GPs will receive a 1.3% "contract uplift" which covers their pay and costs of running their practices.

But the Doctors' and Dentists' Review Body (DDRB) recommended that the wages of general practitioners should be increased by 2.29%.

However, the Department of Health said it "did not agree" with the formula the DDRB used to come to the conclusion.

Christina McAnea, head of health at the union Unison, said: "What kind of message does it send to health workers about the value this government places on their work? And what incentive is there for young people to join the NHS when they are so undervalued?

"Freezing and squeezing pay is crushing morale and heaping financial misery on more than a million NHS workers. At the same time, the NHS is going through a massive reorganisation and staff are dealing with job cuts, rationing and ever-increasing patient numbers.

The health minister Dr Dan Poulter said pay restraint was "essential" across the public sector.