More than one million NHS staff, Armed Forces, and senior civil servants will receive a 1% pay rise.
But the UK government revealed that 600,000 NHS employees – representing more than 50% of the organisation's workforce – will not get the remuneration hike.
This is because they are already receiving a "progression pay" rise, which automatically increases in line with service.
The Treasury also explained that 400 "very senior managers" in the NHS who do not get automatic "progression pay" will not receive the 1% jump either.
The government claimed the total policy will save more than £200m in 2014/15 and over £400 million in 2015/16, which will be reinvested into the health service and help protect jobs.
"Public sector workers make a vital contribution to the effective delivery of public services," said Danny Alexander, chief secretary to the Treasury.
"We need to continue with public sector pay restraint in order to put the nation's finances back on a sustainable footing."
The move, which follows recommendations from the independent Pay Review Bodies (PRB), will mean Armed Forces personnel will also be awarded a 1% hike in pay as well as prison service staff.
However, the government said Police and Crime Commissioners and civil service departments will be given the flexibility to determine how to allocate a 1% award across the workforce for senior staff.
But trade union UNISON slammed the government over the decision and claimed it held contempt for NHS staff.
"This Coalition Government has taken a scalpel to the Pay Body's report and won't escape the anger of NHS staff," said Christina McAnea, UNISON head of health.
"It's a disgrace that 70% of nurses and midwives will not even get a pay rise this year – what sort of message does this give to the value this Government places on dedicated NHS staff?"
The BBC have also claimed that two other large unions, GMB and Unite, will consult their members over the pay deal – which could lead to strike action.
Rehana Azam, a GMB national officer, said: "GMB members across the country will take the blocking of a full 1% pay rise as a personal insult.
"GMB members will not stand aside whilst the government makes such direct attacks on their pay and conditions."
The Prime Minster David Cameron added: "Everyone in the NHS will get at least a 1% pay rise, either through the 1% rise or through the progression payments that they otherwise receive.
"But let's look at the big picture here. It is right to make difficult decisions about public sector pay. It is good that it is increasing and not frozen."