There will still be money for tax cuts in the next Budget despite a public sector pay deal that will cost €180m next year, incoming Taoiseach Leo Varadkar has said.

Unions will begin balloting the country’s 250,000 public sector workers in the coming weeks on the proposals, which include regular pay increases until 2020.

Nine out of 10 public servants will be out of the Financial Emergency Measures in the Public Interest legislation by 2020, and almost a quarter will no longer make pension levy payments.

However, a new permanent pension contribution will be introduced for workers earning more than €34,500, and workers must continue to work an extra 27 ‘unpaid’ minutes a day or face salary reductions.

A total of 73pc of public servants will see their wages rise by more than 7pc within three years.

The pay and pension levy changes are worth 7.4pc to those earning €30,000 a year or less, 7pc to those earning between €50,000 and €55,000 a year and between 6.6pc and 6.9pc to those earning between €55,000 and €80,000 a year.

A worker who joined before 2013 and earning between €60,000 and €65,000 would benefit by €4,247 over the course of the deal.

Mr Varadkar described the deal, which will cost €887m over the next three years, as “affordable”.

He said it will give the Government “space to actually improve services as well as improve pay and also makes the cost of public sector pensions more sustainable into the future”.

Public Expenditure Minister Paschal Donohoe said tax reductions remain a key priority for the Government.

He said that tying down a new permanent pension contribution is “very significant” as it will put public pensions “on a more sustainable footing in the future”.

He insisted the deal offered workers “a pace of wage restoration that is affordable to our economy in line with all the other competing demands that we have”.

“For those outside the public service who focus on how the taxpayers’ resources are used, the message is very clear that we are not going back to wage levels or total compensation levels that ultimately proved unaffordable to everybody,” he said.

Impact’s head of communications, Bernard Harbor, said “over 90pc of public servants will get full restoration of pay over the three-year period”.


“Nobody is doing high-fives about the deal, but I think it is the best we could have achieved. In the coming weeks we will put the deal to our members and vote on it,” he said.

Fianna Fail has warned that problems with pay equalisation for new public sector recruits and staff retention will not go away, despite the new deal.

It described the deal as “vague” on the issue of pay equalisation, noting that workers who joined the public service after 2013 will still be paid less than their colleagues.

“This is a major issue and the Government must outline in more detail how it intends to deal with it,” said Fianna Fail public expenditure spokesman Dara Calleary.

“It’s difficult to see how this issue can be properly addressed given the current financial constraints, but efforts must be made to bring newer workers into line with their colleagues.”