Finance Minister Mr McCreevy was wrong to remove the ceiling on employers' PRSI, business leaders claimed yesterday.

One said the decision was "appalling" and others claimed the increased cost of employment meant companies would encounter difficulty securing new operations employing higher-paid staff for the Republic.

The Minister's move was condemned by the leaders of Citigroup Ireland, IBM Ireland, Dell Ireland and the drinks group C&C.

Mr McCreevy's Estimates suggested he would increase the ceiling, used to limit the employers' share of workers' PRSI payments, to £39,000 from £36,600 in the Budget.

Removing the ceiling would generate an additional £159 million, he said.

Citigroup Ireland's chief executive, Mr Aidan Brady, said: "It's a bit of a shock. It's not something that was anticipated. This will make the task of attracting higher-level jobs into the country much more difficult."

International firms would have to revise forecasts with their parent groups in the light of the change, he said.

C&C's chief executive, Mr Tony O'Brien, said he was "totally surprised" at the development. He added: "The abolition of the ceiling was an appalling decision by the Government, if not hugely damaging. Coming on top of the Programme for Prosperity and Fairness surcharge of 2 per cent this week makes it a real killer blow all right.

"We have worked out the increased cost of PRSI and the 2 per cent charge and it comes to £1.7 million for a full year."

C&C employs 1,700 people in the Republic - it has annual revenues of £600 million.

IBM Ireland's chairman and chief executive, Mr William Burgess, said the move would have a "substantial impact" on the cost of jobs.

"It seems to be penalising the type of jobs we're trying to create in this country - those that have added value."

Mr Burgess said he had no philosophical difficulty with the concept of removing an "artificial ceiling" on PRSI payments. But he would have expected a lowering in employers' PRSI rates to compensate for the increased cost.

IBM employs about 4,500 workers in the Republic. Mr Burgess said the move would impact on its PRSI payments for "hundreds" of its staff. He speculated the removal of the ceiling would cost certain firms "a few hundred thousand pounds".

Mr Burgess is also president of IBEC. Its director of economic affairs, Mr Brian Geoghegan, said: "This came as a surprise to us yesterday - a very unpleasant surprise. People are quite angry, I would say, and I'm not exaggerating."

While Mr McCreevy said the move must be viewed in the context of recent reductions in business tax, Mr Geoghegan said these did not benefit manufacturing firms.

This was because manufacturers already paid corporation tax at 10 per cent - and this would increase to 12.5 per cent in 2003.

Dell Ireland's country manager, Mr Tim McCarthy, said: "This measure could impact on Ireland's competitiveness - a factor which has been crucial to our existing economic success."

NCB Stockbrokers' chief economist, Mr Dermot O'Brien, said: "I cant' see that there's an awful lot of sense in it because it's a direct tax on employers.

"It clearly increases the cost of employment. The impact is on higher-paid people. It comes as a bit of a tax on a well-paid job." IDA Ireland declined to comment.