Around 200 Derry City and Strabane District Council staff have been placed on furlough.
It is estimated the local authority faces a financial loss of up to £6.5m this year as a result of of coronavirus.
On Thursday, councillors agreed to temporarily lay off workers “mainly within the leisure sections and those employed on a casual basis”.
Many councils in NI are facing a “cash crisis” as a result of the outbreak.
The furlough scheme supports employers during the pandemic by temporarily paying wages of their staff.
Under the scheme, employers can claim 80% of employee’s wages – up to £2,500 per employee a month before tax.
The council have confirmed they will make up the remaining 20% of wages for all staff who are affected.
‘Insolvent by September’
The NI Local Government Association (NILGA) has said councils are losing £10.5m a month at a time of extra cost pressures.
NILGA said councils had invested £40m in the Covid-19 response and their rates income could be down by a quarter this financial year.
The umbrella body called for Westminster, Stormont and local government to come together as “one public purse”.
Councillor Martin Reilly said the figures are “really telling” and said councils across Northern Ireland need financial support from Stormont and Westminster.
“If we don’t have help from central government by September the council will be insolvent,” Mr Reilly warned.
Cllr Reilly said due to several revenue streams having stopped due to the pandemic, council was losing in excess of “£700,000-800,000 a month”.
The SDLP councillor said council had been relying heavily on reserve funds, which he said was “not sustainable”.
“Much of our income is gone,” Mr Reilly said.
‘Protect the rate payer’
“Income from car parks, leisure facilities has all disappeared and we need to take the right financial decisions to protect the rate payer”.
“Part of that was unanimously agreeing yesterday to furlough 200 staff,” he added.
Sinn Féin’s Michael Cooper reassured those who were furloughed that they will be back to work “as soon as we can practicably do that”.
Cllr Cooper said terms and conditions of all furloughed staff will be honoured and staff could take some reassurance in council covering the 20% wage gap.
“Hopefully by council covering that gap it will give them that reassurance they will be under no financial hardship,” he added.
On Monday, Communities Minister Deirdre Hargey confirmed councils could apply to furlough non-essential workers under the Coronavirus Job Retention Scheme.
The move came after there was confusion over whether the scheme could be fully accessed by local authorities.
On Wednesday, Fermanagh and Omagh District Council said it had furloughed more than 200 staff, while Mid Ulster District Council confirmed it will temporarily lay off 350 employees.
In a statement, a spokesperson for Derry City and Strabane District Council said the decision to furlough was made following confirmation earlier this week from the Department for Communities that councils could possibly avail of the scheme.
The spokesperson said members agreed that all furloughed staff would be paid their full salary and gave reassurances furloughing would not impact existing terms and conditions of their employment.
“It was outlined to members that consultation and regular communication between management, staff and unions has been proactive throughout this process and that all staff affected are being communicated with directly and reassurance provided in relation to furloughing not impacting on their current working terms and conditions,” the spokesperson said.