It was compromise by both sides on the strike’s key issue — city employees’ ability to bank sick days until a rich retirement payout — that let exhausted negotiators finally shake hands after 35 days of bruising discord, sources say.

The 3,000 workers hit the bricks June 22 determined to preserve the system allowing them to accumulate up to six months of unused sick time to be paid out when they left or retired.

Mayor David Miller has argued the city is no longer able to afford the provision and should scrap it, giving employees an immediate but partial payment for banked time, estimated to average $8,500.

Three sources confirmed that yesterday’s wee-hours breakthrough gives workers an option: Take the immediate cash, or freeze what’s now in the bank and collect the payout upon retirement.

No further sick days can be accumulated as the city moves to a short-term disability plan that only provides benefits to those who are ill or injured.

The compromise lets the city say it ended the sick bank system because no further days will accumulate and many workers will want the instant cash. But it also allows the leaders of the two striking Canadian Union of Public Employees locals to say they protected the banked time of members who want to hold on to it until retirement. Miller, asked yesterday if sick day banking is over, would only say: “Any issue at the table, to reach agreement there has to be flexibility on all sides.”

Miller said the deal falls within parameters set by council before the strike and “is consistent with 2009 public sector settlements.” He enraged union leaders mid-strike by publicly releasing an offer with a one per cent pay hike in each of the first two years, two per cent in 2011 and three per cent in 2012.