An Post has offered to pay €12 million to its 1,300 postmasters as part of a move to end a long-running stand-off with the Irish Postmasters' Union (IPU) over pay and the future of the post office network

Two working parties will also be set up - one to look at the viability and make-up of the post office network and the other to examine a long-term pay deal for IPU members. Both are expected to produce recommendations by the end of the year.

An RTÉ report yesterday suggested that about 500 post offices could close under the restructuring plan.

However, An Post and the IPU said that no figure had been placed on how many post offices might close. This would not be decided until the working group had issued its report, they added.

A spokeswoman for An Post said that "active discussions" were under way with the IPU on a range of issues, but she declined to make further comment.

At present, An Post owns and directly runs about 80 post offices around the country. Another 1,300 are operated under licence by members of the IPU.

It is understood that the viability of each post office will be scrutinised. The IPU had previously warned that 300-400 post offices could close in the next few years if its members were not paid more by the State-owned postal service.

Since 2001, about 450 post offices have shut, according to the IPU. "It's entirely possible that the same number could close over the coming years, but it all depends on these reviews and what happens to the social welfare contract," said John Kane, the IPU's general secretary.

Half of the €12 million proposed agreement relates to a pay increase backdated to last year. The balance is designed to compensate IPU members for increased "premises costs". This has been a key issue for IPU members, given the steep increase in the cost of buying and renting properties in recent times.

It is understood that a deadline of February 28th has been set for a deal to be reached on these proposals. Talks have been under way for some time.

The IPU has agreed to call off tomorrow's planned demonstration in Dublin, which would have disrupted services across the network of post offices. A proposal to run 10 candidates in the forthcoming general election has "also been put on the back-burner" pending agreement on the proposals, the IPU has confirmed.

IPU members are deeply unhappy with their pay. The union claims that 35 postmasters are earning as little as €8,200 a year from An Post for providing services over 5½ days a week. Another 400 are earning less than €17,500.

The IPU hopes that the review will recommend significant changes to the way its members are paid for every transaction they conduct.

Tommy Broughan, the Labour Party's spokesman on communications, said it would be "very alarming" if a large number of post offices were to close.