"The employer had presented the 6.9 percent cost of living adjustment in a meeting with labour on the 4th of July 2012," the Congress of SA Trade Unions said in a statement.

However, in a meeting called by the government on Tuesday, the offer was reduced to 6.7 percent.

Cosatu, which claims to represent over 58 percent of the country's public servants, said government was negotiating in bad faith.

"This is a deliberate attempt to mislead the public in an attempt to pit them against the public service workers."

Government had left Cosatu no choice but to declare a dispute, the federation said.

Public Service and Administration Minister Lindiwe Sisulu said in a statement on Wednesday that government intended finalising negotiations as soon as possible.

"We are negotiating a multi-year agreement within very limited resources; it can be frustrating at times," Sisulu said.

Parties were close to a settlement and it was in everyone's best interest to continue to negotiate within the bargaining council.

An urgent meeting had been requested with all parties, Sisulu said.