It follows proposals put forward last year in a review for an overhaul of police pay, conditions and allowances.
The Police Federation says it is "disappointed" by the announcement.
What are the key changes?
The recommendations of the mammoth two-part Winsor Review of police pay had one simple aim: to stop paying police officers for the time they have served and start paying them for their skills and the challenges they face. In other words - the days of paying an officer more just because he had done 28 years would go.
The first part of the review said police were being paid under a system that had been devised for a world that no longer existed. Forces have shifted resources increasingly into specialised units. That's because (broadly speaking) expert teams - be they officers working on burglary intelligence or those who deal with child abuse - should be able to amass the knowledge needed to solve more crimes more quickly.
Winsor said that reforming pay and conditions would help chiefs to focus resources where they were needed, while preventing some officers from seeking out the easiest of posts.
The second part of the review called for chiefs to be able to make officers redundant - a fundamental shift in the employment protection enjoyed by sworn officers. it also called for physical fitness tests and direct entry into senior ranks for recruits with relevant outside experience - be it military or business management skills. He also wanted accelerated promotion to inspector for the best recruits, to encourage more top graduates into policing.
Police pay is set through a national negotiating board - and disputes go to a arbitration tribunal.
There were a number of sticking points during the negotiations:
The government said that pay needed to be based on skills and how they were used, rather than number of years served. It said forces needed this flexibility because of the different challenges each area of the country faced. Although forces were broadly on track to make spending cuts of up to 20% by March 2015, that was not guaranteed.
Starting salaries will be cut by up to £4,259 from April, making the starting salary £19,000. This salary will be given to those with the least or no relevant experience - such as those who join at 18. But some recruits will start on £22,000 if they have some experience, such as time spent as a special constable. The change in starting salaries will save an estimated £140m over five years.
But the deal also means that many constables will have the opportunity to move to the top of the pay scale -  currently around £36,000 - more quickly, .
The Police Federation which represents rank-and-file officers says this cut in starting salary fails to reflect the dangers inherent in the job and that police constables have lost out because of an unfair comparison between their jobs and those of other public sector workers.
From April, chief constables will have discretion over whether to pay officers regional allowances. Currently, all officers in the Metropolitan and City of London police get a "London allowance" which amounts to an extra £4,338. Officers in other forces in south-east England get an extra payment of between £1,000 and £3,000.
But in the future it will be up to the chiefs of those forces whether to continue paying that. An additional allowance in the capital, known as "London weighting" stays.
All officers from constable to chief inspector can apply for a special payment of £1,212 when they reach the top of the pay grade. The idea was that it would act as an incentive for officers at the top of their scales to carry on working hard.
This payment for the lower ranks was introduced following a deal to give bonuses to police chiefs. But nine out of 10 eligible officers receive the payment. Critics say that means the payment has in effect become a rise for time served. From April, CRTP will be phased out, saving an estimated £73m in the first year.
Constables can't be made redundant. The Winsor Review called for chief constables to be able to get rid of officers to help them make sure they have the right mix of officers and other staff. This is a highly controversial area and negotiations will continue.
The Home Office has decided that there should be direct entry into some of the higher echelons of the police, rather than forcing every recruit to go through the same lengthy career that begins with being a constable. The idea is to encourage more, older, people from a range of backgrounds into the police, particularly high-flying graduates.
The Home Office will start a consultation soon on how direct entry will work.
The Home Secretary is implementing a range of major reforms to police pay in England and Wales after two years of tense negotiations between officers and government.