Pay is set to be one of the central issues over the next few months as efforts are made to negotiate a new partnership agreement.

So far the omens for the social partners are not promising. The list of dissatisfied employee groups is growing - nurses, bus drivers, gardai, teachers and others are already either balloting on action or threatening to go on strike. There is little doubt that the social partners themselves - the trade union leaders, IBEC and the Government - are all committed to the partnership concept. They would like to see another agreement, but there is doubt about whether they can bring employees with them.

The task is more difficult than it might otherwise be, given that talks on the issue will be taking place against a backdrop of ongoing revelations about massive tax evasion among some of those who have previously lectured people on wage restraint.

In addition, there is no doubt that the Exchequer can afford to pay groups such as nurses far more than the Labour Court recommended. Wages in the Republic are close to the bottom of the EU league table but its productivity is close to the top. Therefore, there is considerable space for some wage drift without dramatically undermining competitiveness. Also, there has been a large transfer from labour to profits over recent years and many union officials would like to see more equality in this area.

But the Government's problem is that conceding to the nurses almost guarantees conceding a full, further round to teachers, gardai, prison officers and so on. This is where the system lacks logic. As the nurses wish to actually move up the so-called wage matrix it almost defeats the point of their claim - if all other groups were to benefit by the same amount.

This has always been the problem with wage settlements and to be fair the Government is now attempting to do something about it. The ideal is to have a system where individual wage claims could be looked at on their own merits. This could allow some elements of market forces to apply.

Thus if nurses were leaving the profession because pay was too low, it could be increased. But prison officers would not automatically receive an increase simply because of the nurses' pay hike.

The Fitzpatrick Associates' report - commissioned by the Department of Finance into the future of partnership - has gone some way to addressing some of these problems. Union leaders are currently meeting the authors and a final report should be produced within months. It is hoped this could be used as a base for negotiating the next agreement. Unfortunately it will be too late for the nurses but some of the suggestions may be useful as some sort of a basis for compromise.

Fitzpatrick looked at pay determination systems in the Netherlands, Finland and in Britain and most of its recommendations are based on the situation in one of these countries.

The basic planks of the system are value for money for taxpayers, the need to support public service reform, the need to attract and maintain skilled employees and the need to support national competitiveness through controlling public sector costs.

Its conclusions should provide a useful basis for future negotiations, although the employers and unions do have reservations about different elements of the proposed package.

One element is that performance should be a prerequisite for reward and should inform pay at all levels. This is divided into four sectors - national, sectoral, subsectoral and individuals. Any group's pay could be measured by a combination of two, three or four of these sectors. The national pay agreement would provide the general round of cost-of-living increases. However, IBEC would be concerned that pushing negotiation into the other areas would allow a wage free-for-all and thus is very conscious of annual limits. For their part, the unions are concerned about it going as far as relying on individual performance and believe the State is not yet ready for that.

As a result, it is likely that the next agreement may contain the national and sectoral levels, but with the aim of moving pay increases towards the individual in the agreement after that.

The report also stresses that automatic relativities should be abolished, although it does admit that there will be a need for some sort of relativity, at least between the public and private sectors.

It also calls for greater decentralisation of pay to Government departments or agencies. However, the amount that could be negotiated at this level would be fixed in an annual budget. The system would also be simplified, with fewer categories of staff and individual levels, and the elimination of automatic service-based increments.

In what could prove to be a key recommendation, it calls for the reward of organisational or group performance through non-cumulative rewards. This would allow the payments of once-off bonuses to certain groups and could prove useful in current negotiations, although putting this into practice could be awkward.

However, the problem is that it will be very difficult to use these ideas in, say, the nurses' dispute. The Government had been hoping that the nurses would accept the Labour Court recommendations because this would have left it a much clearer path to the new negotiations. However the nurses' dispute, which is seen as inevitable in most quarters, is due to start on October 19th and the ICTU conference which will proceed with the formal round of negotiations on the new agreement takes place shortly afterwards, on November 4th. These talks could prove very tricky if the dispute is still under way by then.

It appears that the only way through the impasses is for some lateral thinking from the pay negotiators. Some type of sectoral agreement may have to be reached with perhaps reward for some form of productivity. This could take the guise of an agreement on overtime, for example, which could then be divided up, or other payments for different responsibilities. Whatever happens it is clear that a new basis for negotiation is imperative. To date, the private sector has been remarkably acquiescent in voting for new agreements.

But in the last round banking officials, who have only had Partnership-size rises, fared far worse than many public service workers. Between September 1994 and 1998 the public sector received a 17.4 per cent rise, manufacturing workers 17.1 per cent, while construction workers saw their wages increase by 28.5 per cent. However, banking, insurance and building society workers only saw their wages rise by 11.7 per cent. Keeping private sector workers on board could also prove tricky, if there is a ballot next year.