There is a high incidence of performance-related or variable pay in the Republic. Fifty-seven per cent of Irish workers receive some form of top-up to their basic pay based on variable pay, compared with 53.8 per cent in Germany, 41.6 in France, 35 per cent in Britain, Finland and Denmark, and 20 per cent in Austria.

The European Industrial Relations Observatory (EIRO) says the level of variable pay tends to reflect the level of individualisation and decentralisation that exists in labour market bargaining.

While unions fear this trend and some commentators see it as the way of the future, EIRO says there is no scientific basis to support the argument that variable pay is an effective means of boosting productivity or profits. EIRO believes unions may be over reacting to the threat posed by such practices.

The study also says transaction costs involved in a firm negotiating an individual contract with each employee would be prohibitive. Nevertheless, it accepts "many unions fear that employees will ultimately be the losers, and that the spread of variable pay systems will erode social cohesion and solidarity. This threat is highlighted when unions call attention to the. . . lavish share and share-option schemes offered to executives."

In the Irish context, variable pay takes place mainly in the non-unionised high-tech sector and through the partnership clause of the Programme for Prosperity and Fairness. The latter provides for local gain sharing, profit sharing and productivity-based negotiations, which the National Centre for Partnership and Performance (NCPP) will also be promoting.

Its incoming executive chairman, Mr Peter Cassells, argues that the NCPP could "help take the tension out of the debate" on workplace rewards. "The big issue facing us is how to marry the US free-market model and the EU social model."