A Freedom of Information request has revealed that payments will be made to Sarah Tanburn Associates Ltd - understood to be a limited company - on receipt of an invoice, rather than directly to Ms Tanburn.
The council also says it will not make payments to Sarah Tanburn Associates in respect of National Insurance or Income Tax .
Opposition councillors have already slated what they called profligacy and a lack of transparency in decisions about the appointment of Ms Tanburn to shepherd the controversial Local Plan through the planning process.
Now Tory group leader Chris Steward has said the payment arrangement adopted was similar to ones used by various celebrities in recent years to reduce their tax liability, which had been strongly criticised by numerous Labour politicians.
"It is totally hypocritical for this Labour-run authority to adopt this means of payment," he claimed.
But Labour's Cabinet Member for Finance & Performance, Cllr Dafydd Williams, said it was a great pity Cllr Steward had chosen to politicise the arrangement when the Conservatives had in the past supported similar appointments.
"Their crocodile tears are a reflection of their opposition to Labour’s Local Plan which will deliver new homes and jobs for the people of York and their determination to obstruct anything that helps that plan to be delivered," he claimed.
He added that the council chief executive had appointed a 'highly skilled and exceptionally experienced professional', who was eminently qualified to deliver key priorities and who would actually cost the council significantly less than her predecessor in the role.
A council spokeswoman said Sarah Tanburn’s day rate was £700, working four days per week and for 45 weeks per year, which equated to £126,000.
"There are no employer costs for Tax, NI, pension or sick pay," she said. "Sarah will only be paid for days that she works, so if she is absent for any reason (i.e sickness) this amount would be reduced further."