Croydon Council is set to tear up its pay policy and hire a new director on £120,000 a year - after dismissing a £100,000 salary as "uncompetitive".

The newly created assistant chief executive role will offer the fifth largest pay packet at the council in return for helping to run one of three departments created in a restructure of back-office staff.

The "absolutely remarkable" salary is £20,000 higher than recommended by the council's current pay guidelines, which would see a senior manager of similar rank earn between £92,608 and £100,637.

But the council said the restructure, which will merge its four current departments into three - resources, place and people - would save £488,000, and insisted the new job's bumper pay cheque reflected its responsibilities.

It described its current pay stucture for senior staff as "no longer fit for purpose" and has drawn up a new policy, to be considered by the council in February.

Tony Newman, council leader, said: "I accept that local government salaries compared to the average wage in Croydon are very high, but we are in a market place where we have to pay the going rate to get best people.

"As London's largest borough, to attract the very best and keep the very best officials we have to ensure our salaries are competitive with other London  boroughs. They are benchmarked against other similar boroughs."

The assistant chief executive, who will have the official remit of "customer and transformation", will oversee areas including the council's customer call centre, IT, communications and business support.

They will take on some of the duties of the director of corporate services and director of customer, transformation and communications, positions which will be axed, and report directly to chief executive Nathan Elvery, who will head the resources department.

Under changes set to come into force in April, Paul Greenhalgh, executive director of children, families and learning, will lead the people department, while Jo Negrini, executive director of development and environment, will head the place department.

Coun Newman said the restructure would leave the council with one of the smallest senior management teams among London authorities.

A report to council's appointments committee about the new position states: "The changing nature of certain roles in becoming broader, more strategic and reporting directly to chief executive is not provided for in the current pay structure.

"As a result the level of pay attached to the current grades can be uncompetitive."

But Andy Silvester, campaign director for the Taxpayers Alliance, said: "At a time when we're making dramatic but necessary savings across the rest of the council, this salary will strike taxpayers as absolutely remarkable.

"Local Croydon residents deserve clarity on what this job entails - certainly more than they've seen at the minute with this baffling job title.

"Those at the top of Croydon Council need to explain why they've created another town hall tycoon and what he or she will be judged on."

Tim Pollard, leader for the Conservative opposition, said he would seek clarity on whether the new job's responsibilities justified its pay packet.

He said: "There is not enough in the papers to make it clear whether the benefit of this role matches up the salary - it may well do, but at the moment I can't say one way or another.

"My instinct is that this doesn't quite stack up as it stands. There are legitimate questions to ask about whether this is the right way to go, but I'm not in a position yet to say whether it is or it isn't."

A council spokeswoman said: "The role being created takes on responsibilities from two other roles which have been deleted as part of the restructuring of the council, and forms part of the budget savings for 2015/16.

"The council is moving from four to three departments in April 2015; and is reviewing its first tier director posts to ensure a focus on the political priorities of the administration. It is proposed that some first tier roles are deleted, some amended and some created as a result." 

The position is set to be rubber-stamped on Friday by the council's appointments committee, which is required to approve any salaries above £100,000.

Chief executive Nathan Elvery is the council's highest earner, on £180,000 basic pay, while executive directors pick up £137,262.

The council last month announced 140 redundancies as part of £100m budget cuts, which will also lead to the closure of Purley swimming pool.