The Government is believed to be considering a restriction on public sector recruitment as it attempts to balance the books before next month's Budget.

With the pay bill for the State's employees projected in the Estimates to reach €12 billion next year, informed observers believe the Department of Finance is looking at means of reducing recruitment in certain areas.

Almost 220,000 public sector workers are paid directly from the Exchequer. The €12 billion projection in the Estimates is the amount required to pay the current number of staff.

It is understood the Department believes that this will hold the numbers steady in many areas if not reduce them.

But the projection makes no allowance for pay increases under the benchmarking review of public sector salaries.

With up to quarter of the average 9.8 per cent award to be paid next year as a lump sum and an ongoing increase, the first phase of the benchmarking process will add €560 million to the public sector pay bill in a full year.

With talks on a new national wage agreement already under way, paying for the award is the crucial difficulty facing the Government on pay. Except for stating that he will address the matter on Budget day, the Minister for Finance, Mr McCreevy, has given no indication of his thinking.

It is believed, however, that curbs on recruitment in certain areas are being considered as one means of keeping the wage bill down.

While an outright ban is believed unlikely, informed individuals said a measured restriction was possible. Recruitment policy receives attention every year during budget preparations and it is thought that a restriction has not yet been ruled out.

With 259,684 people employed by the State, the local authorities and the non-commercial semi-State bodies, the wage bill amounts to about half of current spending.

Yet curbs could prove sensitive politically, particularly in the health area where the Government has committed to eliminating long waiting lists. With 87,850 workers at the start of the year, the health service is the biggest State employer, but is still subject to criticism over service levels.

The next biggest sector is the education sector with 71,004 workers. At the beginning of the year, there were 36,533 people working in the Civil Service, 12,327 in the Garda and 11,911 in the Defence Forces.