The new commission to be established by the Government to review the pay of State employees will be permitted to compare existing salaries in Ireland with those of staff working in the public service in other countries.

Draft terms of reference to be considered by the Cabinet today will also allow the proposed new commission to compare pay in the public service in Ireland with levels in the private sector.

Government sources, however, stressed this would “absolutely not” mean a return to the benchmarking process of previous years.

It is also expected the latest recommendation of the Low Pay Commission will be published following today's Cabinet meeting, the last before the summer recess.

It is understood the recommended increase in the minimum wage will be significantly lower than last year, when it rose by 50 cent – from €8.65 to €9.15.

Brexit concerns

The latest increase, in contrast, is expected to be about the 10 cent mark, a rise of about 1 per cent.

Sources said that employers lobbied the commission with concerns that the British exit from the European Union would have a serious effect on their businesses, which would be further affected by a significant increase in the minimum wage.

It is expected that two minority reports objecting to the proposal will be released, with one coming from union representatives. During the election campaign, some parties – such as Labour – promised the minimum wage would increase by €2 by 2021, but the latest decision will fall far short of that.

Minister for Jobs Mary Mitchell O’Connor is expected to make a statement on the issue later today.

Pay commission

The Cabinet will be asked today by Minister for Public Expenditure

Paschal Donohoe

to give formal approval for the establishment of a new public service pay commission.

Under current plans, the commission would seek the views of the public and interested parties over the summer.

Final proposals for the operation of the commission would go back to Cabinet for approval in the autumn.

It is envisaged that the finding of the commission on public service pay would not be binding but would inform the Government’s position on the issue.

The Government has insisted that pay policy has to operate within the context of the current Lansdowne Road agreement, which is scheduled to run until 2018.

The commission is expected to produce a final report in the second quarter of 2017, when the Government would have to begin thinking about pay strategy for after the expiry of the Lansdowne Road accord.

The Public Sector Pay Commission was agreed between Fianna Fáil and Fine Gael in the confidence-and-supply arrangement to facilitate a minority government.

Fianna Fáil sources expressed a view that it could lead to a return of benchmarking, and last night the party said it would “ensure modest pay rises” for public sector workers.

Meanwhile, the Cabinet is also expected to hear proposals for a new forum for unions, employers and the Government.