State-owned energy company Bord na Móna halted a controversial payment for its chief executive worth an estimated €57,000 annually after officials said continuing the “unsanctioned” earnings risked undermining public pay policy.
The payment, which covered benefit-in-kind taxes on Tom Donnellan’s health insurance and company car, has been dropped from a new contract signed by the chief executive in April, the company confirmed.
It comes after fears, laid out in internal papers drawn up by the Department of Public Expenditure (DPER), that continuing the payment could cause public outcry.
In a submission to Minister for Public Expenditure Jack Chambers last February, DPER officials said that the payment was “unsanctioned”, and outlined that it “undermines the principle” whereby someone receiving a taxable benefit – such as a company car – is the one who pays the tax on it.
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Mr Donnellan has been in receipt of the payment, alongside his salary of €225,000, since at least 2023.
The benefit – known as “grossing up” – “poses significant public perception risks,” the officials told Mr Chambers after a contract extension and higher salary was sought for Mr Donnellan.
“[The arrangement] was put in place without sanction, and amounts to an increase in remuneration of approximately €57,000 (25 per cent). If sanction were to be conveyed to continue this arrangement, it would legitimise the arrangement and consequently undermine public pay policy.”
The files were released under the Freedom of Information Act.
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Documents show that the department agreed in April to offer a three-year extension to Mr Donnellan’s contract on his existing salary of €225,000. DPER stipulated that “no grossing up arrangements can be in place, and the incidence of taxation for any benefits must fall upon the recipient.”
A spokeswoman for Bord na Móna confirmed that Mr Donnellan’s contract was extended “and remuneration terms are fully in line with the approvals granted”.
It is understood the department had approved the previous package and the company had taken advice on the grossing up, which sources said was in line with advice received.
The Government has faced a cascade of representations by State bodies following a decision by the Cabinet in April to loosen restrictions on top-level pay in commercial State companies imposed in 2011 following the economic crash. It had put in place a process to review pay at the top levels of the commercial semistate sector.
Ministers in recent weeks have given the go-ahead for a €75,000 increase in the salary rate for the head of Irish Rail. The rail company said Mary Considine, former chief executive of the Shannon Airport Group, had been appointed at a salary of €300,000. Irish Rail said this was in keeping with the salary band provided for the post by the recent Government review.
Pay for the top post at Irish Rail had previously been set at €225,000 but the Department of Transport said it could not fill the position at this salary.
An Post chairman Kieran Mulvey is understood to have written to the Government pressing it to provide the company’s board with new salary bands to facilitate a recruitment process for a new chief executive. An Post boss David McRedmond is scheduled to leave next year.
State-owned companies such as the ESB, Gas Networks Ireland, Uisce Éireann and Bus Éireann have urged the Government to review pay for their chief executives, while the Land Development Agency this weekend said that its chief executive’s pay “ranks significantly behind” commercial and public sector equivalents.
