A proposed 4% pay rise for Isle of Man health workers is a better deal than that awarded to NHS staff in the same jobs in England, Manx Care has said.
The offer was rejected by the Royal College of Nursing after a ballot of its members.
The health provider said it would have matched a pay increase in Scotland and exceeded a 3% rise in England.
Health Minister Lawrie Hooper has warned a higher offer would have a "knock-on affect on services".
Tynwald recently approved his request for a further £10m to cover a health overspend, which included additional funds to cover the proposed rise for the 2021-2022 financial year.
Mr Hooper said there was a "low likelihood" of being able to ask the Treasury and Tynwald for more money.
"If the award ends up being higher, it is going to have a knock-on affect on services, and we will have to make difficult decisions about what we can and can't do in order to cover that," he added.
The Royal College of Nursing (RCN) is one of a group of unions representing health workers, which also includes Prospect and Unite, which has been negotiating the pay award since May last year, when a 1% rise was initially put forward.
In a statement, Manx Care said it had now sought to enter further talks to consider the "next steps" that could be taken.
Salary scales for island health workers were higher than in England as part of efforts to attract staff, meaning the 4% deal "would have given colleagues anywhere between a 14% and a 29% pay lead", the health provider added.
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