An ageing population is behind a need for the council to increase the amount of money it pumps into its pension fund to help keep it solvent.
Councillors agreed to pump more into the fund over the next three years when they met at the Town Hall on Wednesday.
Head of finance Graham Johnston said a phased increase to the employers’ contribution rate of 1.1 per cent was required between now and 2012 in order to prop up the fund.
The move means the rate, previously set at 14.4 per cent, will rise to 15.5 per cent by the end of next year, 16.6 per cent by the end of 2011 and 17.7 per cent in 2011/12.
That equates to an annual increase in employee costs of around £770,000 per year, although the additional cost has already been budgeted for this financial year.
Mr Johnston said the trend was common in all local government pension schemes.
He said the contribution rate in Shetland would still be one of the lowest in Scotland.
Councillor Gary Robinson moved the recommendation. However discussion on the fund got off to a slow start, as members – who either draw from or pay into the fund – initially put forward a unanimous declaration of interest.