Mr Donohoe, speaking yesterday, said that any deal offered by him in talks with unions on behalf of the Government will have to “be affordable and fair”.
The minister said that at this stage no formal negotiating position has been arrived at as he has not brought any memo to Cabinet for approval for a successor deal to the Lansdowne Road Agreement. That deal expires next year.
However, sources speaking last night said that pay increases of 2% per year for three years would be within the “affordable spectrum”.
Mr Donohoe said that he wants to hear from the Public Sector Pay Commission before he makes any detailed comment on his strategy.
“I will not comment until I have Cabinet approval as to what our negotiating platform will be.
“I am engaging in developing our position along with my officials and I will comment further on this matter in the aftermath of the Public Sector Pay Commission publishing its report which I expect in the coming weeks,” he said.
“I will then set out the Government response to those issues and our views as regarding how this matter should be dealt with,” he said.
However, echoing his warning to unions two weeks’ ago about difficulties meeting the public pay demands, Mr Donohoe said the deal must be fair to taxpayers as well as state employees.
“I am clear on us coming up with a strategy which is affordable to the state and fair to those who working in our public services and those who rely on them,” he said.
It is understood that Mr Donohoe and the Government are prepared to award a pay rise of 6% over three years as part of a wider program of reform on public pay and pensions.
It is also understood that managers in areas where it is difficult to recruit staff may be given some flexibility to pay more as an inducement.
However, the issue of public sector pensions is also high on the agenda and comes just days after Social Protection Minister Leo Varadkar announced a major reform for private sector pensions.
The Pay Commission’s report is expected to be published in the next two weeks and Mr Donohoe has said it will determine the basis of his offer to unions when talks begin in earnest.
A deal must be finalised in time for October’s budget to allow the new pay rises to kick in next year.
A confidential Government submission to the commission shows the bill for existing pension arrangements is now €3.3bn a year.
The document urges the commission to “reflect the increased cost of retirement benefit provision in the public service and increased value of these retirement benefits relative to private sector retirement benefits”.
It has been speculated that the Government may seek to convert the existing pension levy — which averages about 5% and which unions want to see abolished — into a greater staff pension contribution for those earning above a certain threshold.