The San Luis Obispo City Council unanimously approved a three-year contract with the city’s largest employee group Tuesday night, ending a declared impasse.

The agreement with the San Luis Obispo City Employees Association includes a 6.8 percent reduction in total compensation, equaling about $952,000 in savings over the three-year contract. It will save the city an estimated $362,000 this year. The union also agreed to no cost-of-living or other salary raises for three years.

The contract, which expires in December 2014, implements a two-tier pension system for future hires. Future employees will receive less in terms of retirement benefits. The projected savings will come from all employees paying their entire retirement contribution; the city up to now paid the full contribution.

The union represents maintenance and utility workers, inspectors, engineers, planners and administrative support.

This had been the first time an impasse had been declared with the union. The union had been working without a contract since negotiations began in December.