At midnight on Wednesday workers formally rejected management's offer of a two per cent annual pay rise and began limited industrial action as they pondered a full strike.

"At this point it is not a full strike action, it is a ban on overtime and a ban on shift changes, meaning workers only work their rostered shifts," a United Workers Union spokeswoman said.

The manufacturing plant is owned by Sun Pharmaceutical Industries (Australia) Pty Limited, a subsidiary of Indian-owned multinational Sun Pharmaceutical Industries Ltd.

Sun Pharma's annual report shows the Australian operation haemorrhaged more than $8 million in the 2020-21 financial year, which may be connected to the pay dispute. Sun Pharma was contacted for comment but declined.

The UWU said Sun Pharma workers had started enterprise bargaining negotiations in January, asking for a four per cent pay rise, but company management had refused to change from its initial two per cent offer.

"Not putting in a counter offer is poor form and unusual behaviour from a company," the UWU spokeswoman said.

In a Facebook post, the UWU alleged Sun Pharma was "threaten(ing) workers with nuclear options, including locking workers out if they take legal industrial action".

"Facing an offer from multinational pharmaceuticals company Sun Pharma that would leave workers going backwards, proud United Workers Union members said enough was enough," the post read.

"Workers said the miserly offer of 2 per cent a year - way below the current level of inflation - would leave them worse off and they voted in favour of taking protected industrial action."

The UWU spokeswoman said workers were "in a holding pattern as we decide whether to take full strike action".

The Sun Pharma plant is the biggest private employer in Port Fairy and a significant contributor to the local economy.

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