Martin Services Ltd is a resale and distribution company that supplies first aid and hygiene products, mainly in the Republic. Based in Dublin, it employs 17 people, 15 of whom are full-time.

While the managing director, Mr Ian Martin, welcomes the prospect of a partnership agreement, he feels that the proposed pay increases may be excessive. "I think the overall 7 per cent is too high but it is better than having free bargaining," he says.

Although the company is not unionised, Mr Martin says that he will honour any agreement reached.

He points out that, for many companies, a 7 per cent pay rise over 18 months will effectively mean a 3.5 per cent rise this year and a similar rise next year, as it is standard to review salaries every 12 months, rather than every six.

Like many small firms, Martin Services has suffered from a general increase in the cost of doing business in the past year. Further increases in salaries will force private businesses to become more efficient or to raise prices.

He says that a general price increase is not an option for him as that may give foreign competitors an opportunity to move into the Irish market.

Instead, productivity will have to be improved. "As employers, we are going to have to be more demanding of our employees," he says.

Even so, he expects many businesses will be unable to meet the recommended pay increases. "I think we are going to get a lot of derogation of the agreement - many companies just can't afford it."