The Secretary of State Karen Bradley has announced that Stormont's 90 MLAs will face pay cuts of over £13,000.
Salaries will be slashed by more than £7,000 from November with a further reduction of over £6,000 in February if the parties cannot reach an agreement to return to Stormont.
The reduction will see MLA salaries fall from £49,500 to £35,888.
Mrs Bradley's predecessor as Northern Ireland Secretary, James Brokenshire, commissioned former Assembly chief executive Trevor Reaney to examine the controversial issue of Assembly members' pay.
Last December, Mr Reaney recommended the 27.5% cut.
The devolved administration at Stormont has not sat since January 2017 in a row over identity issues such as the position of the Irish language.
Mrs Bradley told the House of Commons yesterday: "The reduction will take effect in two stages, commencing in November - it would not reduce the allowance for staff as I do not think that MLAs' staff should suffer."
Mrs Bradley also confirmed that she will bring forward legislation to allow civil servants to make decisions in the absence of a functioning Executive but ruled out calling fresh Assembly elections.
She added: "I recognise that there is a need to provide reassurance and clarity to both the Northern Ireland Civil Service and the people of Northern Ireland on the mechanisms for the continued delivery of public services.
"So, the legislation I intend to introduce after the conference recess will also include provisions to give greater clarity and certainty to enable Northern Ireland departments to continue to take decisions in Northern Ireland in the public interest and to ensure the continued delivery of public services."
The decision-making power of Stormont's civil servants had been called into question by a Court of Appeal ruling in July which said that they did not have the power to make key decisions without the approval of a minister.
The ruling also said that senior civil servant Peter May had gone beyond his remit when he gave the go-ahead for a controversial waste incinerator in Mallusk, Co Antrim.
Mrs Bradley also outlined plans to introduce legislation to remove the obligation to call an Assembly election.
"I have not believed and do not now believe that holding an election during this time of significant change and political uncertainty would be helpful or would increase the prospects of restoring the Executive," she said.
"I intend, therefore, to introduce primary legislation in October to set aside for a limited and prescribed period the legal requirement to propose a date for a further election."
Reacting, DUP leader Arlene Foster said it is deeply frustrating and utterly careless that Sinn Fein has decided to block government for almost 600 days.
"Ultimately, Northern Ireland needs a ministerial decision-making mechanism which respects democracy," she said.
"We would prefer to have a fully functioning local Executive where decisions about our schools, roads and hospitals are being made in Northern Ireland.
"Sinn Fein is the roadblock to an Executive. It is the only major party boycotting the Executive. All other parties would elect ministers today without preconditions," she added.
Sinn Fein's deputy leader Michelle O'Neill said it was right that the Secretary of State had finally moved, but only because she faced the prospect of the courts ordering her to do so.
"The political process has been allowed to drift for far too long as a result of her government adopting a 'do nothing' approach rather than confronting the denial of rights by the DUP. The reduction in MLA pay should have been introduced months ago.
"Sinn Fein told Karen Bradley that on several occasions but it is clear she was reluctant to move because of resistance from the DUP. That position has now become untenable and it is right wages are finally being reduced."
UIster Unionist leader Robin Swann described the move as only a sticking plaster on a huge political mess in which Northern Ireland finds itself.
He said: "This is the inevitable consequence of the ongoing political impasse which has prevented the formation of a fully functioning Assembly and Executive. The cut to pay should be linked to a meaningful and productive talks process."
SDLP leader Colum Eastwood MLA said the current political vacuum has already gone on for far too long: "The truth remains, without a functioning Assembly, MLAs are not fulfilling the full job that they were elected to do. No more - it is time for action and responsibility."
Alliance leader Naomi Long said the Secretary of State's interventions were "long overdue". Mrs Long said she was glad to see Mrs Bradley "finally rise to the challenge", after her party convened the first meeting of the political parties in eight months earlier this week.
Green Party leader Steven Agnew said the overdue move was entirely right given the present political impasse: "I hope this will satisfy the nurses, teachers, drivers and all hard working people across Northern Ireland who have expressed understandable anger at a lack of political progress from full salaried MLAs."
NI Chamber chief executive, Ann McGregor said the steps being taken should allow civil servants to proceed with vital decisions which are to the benefit of everyone in Northern Ireland.
"There are a number of key infrastructure projects being held back awaiting final ministerial approval," she said.
"Failure to move these projects forward will have an adverse effect on the economy and hold back much needed investment."