Inside the €5bn pay offer to public servants

Updated / Tuesday, 10 Nov 2026 06:25

The public sector pay talks are hugely important.

Not only do they set wages for gardaí, doctors, teachers, nurses and thousands of others who work for the State, they are also used as a benchmark for many others across the economy.

Critically they have a huge impact on the public finances.

This year the Government will spend €100 billion on day-to-day expenditure – one-third, or €34bn, is on public sector pay.

The last pay agreement, which ran from early 2024 to the middle of this year, granted public sector workers pay increases of 10.25% over two and a half years, at a cost of €3.6bn to the taxpayer.

This time the Government has offered 10.5% at a cost of close on €5bn. We don't yet know if unions will recommend that workers accept it.

The exact duration of any deal has not yet been agreed. But it could run for between two-and-a-half and three years. It would be likely to be backdated to July when the last agreement expired.

The Government pencilled in €1.2bn for a public sector pay increase for next year but acknowledged that figure was just a starting point for negotiations.

It is clear the cost for next year will be significantly above that.

One of the reasons any new deal is going to cost more than the last is because the number of public servants increased by 27,000 since the last agreement commenced in early 2024.

But it's part of a trend which has been continuing since the economy recovered after the financial crash.

The number of public sector workers rose by 40% from 301,000 in 2015 to 424,000 in 2026.

As the population has risen, so too has demand for services.

That means the State has hired more doctors, nurses, gardaí and teachers.

The big question for workers is whether the Government's offer will beat inflation.

The Central Bank predicts the rise in the cost of living will be 3.4% on average for this year, 3.1% next year and 2% in 2028. It is currently running at 4%.

If those projections are correct, the deal would keep public sector pay just ahead of inflation.

For example, if the offer is accepted by unions, it would give workers a 4% pay rise this year (if the new deal is combined with the previous one).

But forecasting what will happen to the cost of living is remarkably difficult. Economists frequently get it wrong.

Few predicted the wars in Ukraine and Iran which had a huge bearing on energy prices and resulted in rising costs for consumers around the world.

At the same time, the officials in Government Buildings have indicated they want pay restraint.

In Budget 2027, the Department of Public Expenditure and Reform said it wanted to see expenditure growth happen in a "more sustainable and disciplined manner".

It said that meant a "moderation in the rate of increase of both current expenditure and staffing levels".

But any pay rise will be a permanent addition to expenditure on top of years of increases.

This year, overall day-to-day spending will be 8% up on 2025.

That's double the rate of inflation.

The problem is that spending is propped up by highly unreliable corporation tax paid by multinationals.

If these windfall taxes were to fall or disappear, it would create a huge deficit in the public finances because the rising public sector pay bill will still have to be funded.