The Government is to consider granting significant pay increases to the chief executives of commercial state companies, as outlined in a consultant's report. Ministers are likely to broadly accept its recommendations.

The report, by Hay Consultants, is due to be considered by the Cabinet this week and, if accepted, would lead to significant pay increases for many in chief executive positions.

The Hay report was commissioned as a follow-up to the Buckley report on public sector pay. The Buckley report was presented to Government in March 1997, but only acted on a year later. Then the Government implemented the Buckley recommendations for most areas of the public service. However, for the commercial state sector, Buckley recommended that pay be linked to comparable jobs in the private sector.

The Government then commissioned the consultants to come up with appropriate pay levels for the various jobs involved and they are believed to have outlined acceptable minimum and average rates of pay for the different positions.

In almost every case these rates of pay will be well above the levels which had applied to the commercial state sector under the old Gleeson guidelines.

Sources believe that the fact the report is now back on the Government agenda, having being completed in the middle of last year, indicates that ministers are likely to broadly accept its recommendations.

Politically, this may be seen as creating some problems, at a time when various sectors of the public service are seeking pay increases. However, there is a view that with many chief executives of commercial state bodies already on special arrangements, the time has come to sort the issue out.

A number of the bigger State companies have already offered special contracts to their chief executives as a way around the existing guidelines. The chief executives of Telecom Eireann, Aer Lingus, ICCBank, the VHI and Bord Na Mona - amongst others - are all on such contracts. In other cases - particularly the ESB - the Government has clashed with company boards over appropriate packages. Those chief executives still on the old guidelines often see management underneath them in the organisation earning substantially more, a clearly unsustainable situation.

Now, if the Hay report is accepted by the Government, chief executives such as John Burke at Aer Rianta, Philip Cronin at Bord Gais, Michael McDonnell at CIE, Martin Lowery at Coillte and John Hynes at An Post, could see their salaries rise sharply to bring them more in line with salaries of chief executives of private companies of a similar size.

The consultants are believed to have ranked the different jobs and applied a minimum acceptable and an average salary to each job. If the Government accepts the new pay levels, those on special contract arrangements will not be affected, but the other chief executives of the commercial state companies would be in line for substantial increases.

More importantly, the board of the companies involved would find it a much more clear-cut exercise to hire new chief executives in the years to come.