The Saskatchewan government has ordered the entire public service to look at cost-cutting measures to help reduce the province's $1-billion deficit.

On Friday, public sector services received a written directive to cap their next budget for employee compensation.

"For the government fiscal year 2017-18 total compensation costs will be no greater than 2016-17," said the letter.

"Negotiations need to commence immediately in order to achieve these goals for in-scope employees prior to April 1, 2017."

It said all public sector employers had to avoid increases to their total compensation budget from negotiations that were ongoing, or those for contracts that were yet to expire.

'Challenging fiscal situation'

The letter suggested considering a freeze on wage increases, range increments and performance or bonus pay. That would apply to both unionized employees and managers.

It asked employers and unions to look for other immediate and long-term measures to reduce compensation costs.

It also urged employers to start consultations and general collective bargaining to meet the directive.

"The province of Saskatchewan is experiencing a very challenging fiscal situation, one which requires all of us to share in the effort required to reduce expenses and increase revenue," said the letter.

Government defends move

Finance Minister Kevin Doherty told reporters at a news conference on Monday that 41 entities had received the directive.

What this government's doing right now by attacking education doesn't balance the budget. - Trent Wotherspoon, interim NDP Leader

He said it was not a "threat" of layoffs but a request for employers to start discussions with unions and employee groups about cost-cutting options.

"It could be a reduction in salaries at this point in time; it could be leaves of absence; it could be unpaid days; it could be layoffs," he said.

Doherty defended the government's spending on infrastructure, such as the construction of new schools, saying it was necessary based on the number of students expected in coming years.

He said raising taxes was a "serious option" being considered by the government but would not provide more detail on which areas would be targeted, or if new taxes would be introduced.

Compensation cuts won't balance budget: NDP

Speaking on the issue of school board cutbacks, interim NDP Leader Trent Wotherspoon described the move as "desperate" and "damaging," saying the government should find savings elsewhere.

Interim NDP Leader Trent Wotherspoon said the government's memo ordering public services to cut compensation spending was 'desperate' and 'damaging.' (William Desaulniers/CBC News)

"They say they're going to go break their deals with teachers and shortchange students," he said.

He challenged the government to find "value for taxpayers" on what he called a "billion-dollar-plus overrun on their bypass."

Wotherspoon added: "What this government's doing right now by attacking education doesn't balance the budget. In fact, it hurts us economically and financially into the future."