Liverpool City Council has been accused of being "out of touch" by recruiting a new chief executive with a salary of up to £197,500.
Communities and Local Government Secretary Eric Pickles criticised the council for the pay - which is £55,000 more than the prime minister.
But the Labour council leader Joe Anderson said the package would save it tens of thousands of pounds a year.
The previous chief executive Colin Hilton was paid more than £200,000.
He also received performance-related bonuses - which his successor will not get.
It comes after 39 executives at the council agreed to a pay cut to save the authority more than £500,000.
And managers earning more than £40,000 have been offered voluntary redundancy, to try to cut costs.
'Culture of excess'
Mr Pickles said: "Once again another Labour council hasn't got the memo about public sector pay restraint.
"Shelling out taxpayers' cash on a bumper pay packet whilst the rest of the country is struggling in this tough economic climate shows just how out of touch Liverpool City Council is.
"We need to curb a culture of excess in local government which is why we will require councils to publish more information online on the pay and perks of senior staff, and allow elected councillors to veto high pay packets."
But Mr Anderson said the authority needed to recruit "an outstanding person" during the "very difficult times for local government".
He added: "We believe we are offering a very attractive salary and I am confident that there will be a lot of interest from high calibre candidates who want to lead the city through challenging times."
The post is expected to be filled by October.