The Government is looking at a combination of pay cuts, the indefinite freezing of increments and changes to premium and overtime payments for frontline public service staff if there is no agreementwith unions on reducing the publicservice pay and pensions bill followingthe collapse of the proposed Croke Park II agreement.

The Government is insisting that the planned €1 billion reduction in the public service pay and pensions bill over the next three years must be delivered and has asked the chief executive of the Labour Relations Commission to report back early next month on whether he believes a deal can be reached with unions.

Ministers have signalled that if there is no negotiated agreemnent with unions the Government will introduction legislation to provide for the savings. However the Government has not set out the shape of any such legislation. The Government had previously suggested a seven per cent pay cut would be applied if staff rejected the Croke Park II proposals, however it is now expected that the Government response would involve a combination of measures.

The Irish Times understands that a key element of the Government’s proposals for any new legislation would be a pay cut for those earning over €65,000. Any such pay cut would be permanent with no scope for potentially regaining the money for those earning up to €100,000 as there was in the Croke Park II proposals which were rejected by unions in recent weeks.

Secondly the Government is understood to be looking at freezing the payment of incremental pay rises for an indefinite period. Increments in the public service cost around €200 million per year and have continued to be paid over recent years despite the economic downturn.

Frontline personnel in specific sectors of the public service such as nurses would face changes to current premium rate and overtime payment while there would also be provision to reduce overtime rates.

Any new legislation is also likely to allow greater scoope for the re-deployment of public service staff.

Last week Taoiseach Enda Kenny also raised the prospect of compulsory redundancies in the public service in the absence of agreement on pay cuts.

The Minister for Public Expenditure and Reform Brendan Howlin said if the State was a private sector employer in the current circumstances job losses would be on the cards.

A number of trade unions have warned of possible strike action in the event of the Government moving ahead unilaterally to cut pay or change conditions of employment as part of a bid to reduce the public service pay bill.

Teaching unions have already decided to ballot members but any industrial action in the education sector is unlikley to commence until September.

Speaking earlier today, Minister for Communications Pat Rabbitte said Mr Mulvey would have a difficult job in talking to the unions.

“It is a difficult task that has been given to him, but the nature of industrial relations is that sometimes the impossible can be achieved, but we’ll have to wait and see.”

Asked about cuts in allowances, as opposed to core pay, he said: “The way it has built up on an ad hoc basis over the years, some of the additional pay to core pay does really constitute the income of people. I understand that and have great sympathy with it. But for that reason the adjustments made, for example time and three quarters instead of double time on a Sunday… I think it is possible to defend that until economic circumstances get better in this country.”