An Post is facing an additional wage bill of €38 million this year after the Labour Court called on the company to pay increases due under the Sustaining Progress partnership deal.

While the payments will be subject to the delivery of work practice changes in the mail delivery and collection division, the benefit from any savings from modernisation is unlikely to be fully felt until next year.

This reflects the time needed to implement the changes which themselves must be put to a ballot of staff. Such a vote is not likely to be taken until after the summer holiday period.

The company made pretax profits last year of €7 million on a turnover of €750 million. It has made no public projection in relation to trading this year, given the uncertainty surrounding the wage bill. But given its slim profit margin, the direction to pay the increase is likely to increase pressure on the State company.

In addition, the final impact of a Labour Court judgment on An Post's finances this year is difficult to guage because the company's application to ComReg to increase the price of a basic stamp to 60 cent from 48 cent is outstanding.

The company wants a determination by August 31st because any increase after then would not be reflected next year in the payments it receives for processing international mail for delivery within the State.

Failure to impose the increase before September would cost the company some €12 million in potential revenues from international mail.

The Labour Court judgment handed down yesterday follows a direction on the company from an independent assessor who said earlier this year that it should backdate to January 1st a 5 per cent pay rise.

This rise reflects a 3 per cent increase due since November 2003 and a 2 per cent increase due since August 2004. The company has agreed to accept that direction.

Three additional pay rises will fall due this year, assuming work practice changes are agreed, bringing the total cost to €38 million. The pay rises are: a 2 per cent increase due since February this year, a 1.5 per cent due since May, and a 1.5 per cent rise due in November.

There was no detailed response last evening from the Communications Workers Union, which represents most staff in An Post. The union's general secretary, Steve Fitzpatrick, said: "It's an improvement from where we were. We'll give it a good examination over the next 24 hours. We'll see where we'll stand then."

An Post's spokeswoman said: "Management and the board will be examining this very closely".