About 70 workers have downed tools amid claims their city council paymasters have gone back on an agreement to pay them thousands of pounds in back pay. They say they are owed compensation as a result of a salary restructure undergone by the authority and are refusing to go back to work until the outstanding wages are paid.

"The boys are refusing to work until it is sorted," said one binman.

"This whole situation has been a diabolical cock-up by the council and they need to do something about it."

The strike began first thing this morning and initially involved about 40 workers, but by 9.30am the majority of the council's rubbish collection workforce had joined them. There will be no bin collections in the city today and it is not known when the service will be resumed.

The impromptu walkout was sparked after the council implemented a wholesale review of salaries among its 6,500 employees in a bid to ensure equality of pay. While some wages have gone down as a result of the review, others – including those of many city binmen – were supposed to have been increased. But although the workers were promised back pay to make up for the wages they should have been earning, the strikers claim the council has gone back on its promise.

One striker said: "After the job evaluation, the majority of us were supposed to have a wage increase, and we were told we would be compensated for back pay we were owed. We got letters promising us the money so we had it in black and white, but the council has since turned round and said we're not getting it any more. They have moved the goalposts and we have been left in the dark as to what's happening."

Another protesting binman said he and his co-workers had been left out of pocket by the council's apparent about-turn on its pay promise. "People are financially stuck because the council has messed us about," he said. "We have loans and overdrafts to pay and need to know when we will be compensated. We are not going to do any work until further notice – until things are sorted out."

Strike organisers say further industrial action will be taken on a "day by day" basis until the pay dispute with the council has been resolved.

Director of city services for Peterborough City Council Mike Heath said: "Refuse collectors have today walked out on an unofficial strike despite advice from their union they should return to work while further discussions with the management take place.

"The issue of contention are the payments made to individuals as a result of job evaluation and harmonisation of terms and conditions that the city council has undertaken for all of its employees.

"We are hoping to recommence refuse collections from tomorrow and will start with those which should have been collected today. Residents undergoing collections on Tuesday are advised to put their bins out as normal."