Employers  have softened their demand for an across-the-board pay pause in talks on a new national partnership deal.

In negotiations yesterday, however, they insisted that union demands for wage increases in excess of inflation were unrealistic.

The two sides spent an hour discussing the pay issue as part of a wider meeting on a possible successor to the Programme for Prosperity and Fairness.

The employers' delegation presented union leaders with the results of an up-to-date survey on the ability of businesses to pay wage increases next year. The results divided employers into three categories - those who would require a pay pause, those who could pay minimal increases and those who might be able to fund rises up to, though not necessarily matching, the inflation rate.

It is understood that IBEC, the employers' representative body, will continue to insist that a majority of its members will require a pay freeze.

Nevertheless, there has been movement in the employers' position since the talks formally opened last month, when IBEC said a six-month pay pause was required in all sectors to restore competitiveness.

Behind-the-scenes dialogue is likely to take place before the two sides return to the negotiating table on Tuesday.

Employers will be asked at that meeting how the position they are outlining, with some sectors under more pressure than others, might be accommodated.

Unions are seeking pay increases at least in line with inflation, with a local bargaining element built in.

This is unacceptable to IBEC, which believes this would be a "lose-lose" scenario for employers - across-the-board increases matching inflation, which it says most members cannot afford, combined with the prospect of top-up increases in individual sectors.

Union leaders are fearful, however, that even if cost-of-living wage rises are secured, the benefits will be lost through indirect taxation rises in the Budget.

A plenary session of all the social partners will meet next Wednesday, when benchmarking will be on the agenda.

Negotiations on the programme of modernisation and change in the public service, tied to a 9 per cent pay rise due under benchmarking, are likely to be completed shortly.