The Labour Court has issued recommendations on the national minimum pay rate to the Minister for Labour Affairs Tony Killeen. The court has advised the Minister to increase the minimum hourly rate of pay to €8.30 from January 1st, 2007. It has also recommended a further increase to €8.65 to take effect from July 1st, 2007.

Employer representative groups were critical of the proposal last night. Ibec, the largest business lobby, said it would push up the cost of goods and services further.

The 13 per cent increase envisioned under the recommendation are in excess of the current national wage agreement and will mean that the Republic will have the second highest minimum wage in Europe from next January, according to Ibec's Brendan McGinty.

Mark Fielding, the chief executive of Isme, which represents mostly small business, said the increase "will be devastating for many small companies who have already experienced a 30 per cent average increase in business costs in the last three years.

Mr Killeen said yesterday that he will take into account the potential impact on employment, overall economic conditions and competitiveness, when considering the recommended increases.

"I am conscious of the very tight deadlines to meet the wish of the social partners, as expressed in the Partnership Agreement Towards 2016, that the minimum wage be adjusted from 1st January 2007," the Minister added.

A national minimum wage was first introduced in the State in April 2000, and was initially set at an hourly rate of £4.40 (€5.59).

The minimum pay rate has been increased four times in the interim, bringing it up to the current level of €7.65 per hour.

Under the Towards 2016 social partnership agreement, Ibec and the Irish Congress of Trade Unions (Ictu) had agreed to make a joint recommendation to the Government on increasing the minimum wage rate.

The proposal was due for submission by September 1st, but agreement could not be reached on the amount of the increase. The issue was referred to the Labour Court by Ictu in October.

According to the most recent survey conducted by the ESRI in relation to the effect of the national minimum wage, approximately 70,500 (or 7.5 per cent) of employees working in private sector, non-agricultural firms are earning the minimum wage.

However, this is a substantial decrease from 21 per cent of workers on the minimum wage in 1999.