A Berkeley city union is giving up cost of living increases and agreeing to pension reform in a move it says will ease the perception that government workers are greedy.

"We want to diminish the rumors about public sector workers that they are greedy," Gladys Gray, president of the Berkeley maintenance workers chapter of the Service Employees International Union told Berkeley City Council members last week. "We're trying to change this image and we're willing to give back to the city to balance this budget."

The 500 clerical and maintenance employees agreed to give up cost of living increases through 2015 and start contributing to their pensions, a move which will save the city about $4 million over two years, said City Manager Phil Kamlarz.

Police and fire fighters are not affected by either the change in cost of living increases or pension reforms.

The city is currently trying to balance a budget with a $12 million shortfall.

Existing union employees will start paying 2 to 3 percent of their salary toward their retirement plan, depending on contribution rates set by the state of California.

The city will pay around 27 percent of an employee's salary toward pensions while investment gains in the state-run plan pay the rest.

New employees hired after 2012 will pay up to 5 percent of their salaries toward retirement.

In addition, when new employees retire, they will receive less money each month or 2 percent of their salary. Existing city employees who retire are receiving 2.7 percent of their salary each month.

Kamlarz said the agreement reduces tension among employees, increases morale and will improve services to residents.

"There's a lot of tension and fighting in other cities, so coming to a solution and working together is good for the long term health of the city," Kamlarz said.

Doug Oakley covers Berkeley. Contact him at 510-843-1408. Follow him at Twitter.com/douglasoakley