Employers will have to pay the first four weeks of their staff’s sick pay under proposals drawn up by Minister for Social Protection Joan Burton to shave €150 million off her budget.

Ms Burton is proposing to transfer responsibility for paying sick pay from the Department of Social Protection to individual employers in the first month of illness, The Irish Times understands.

The plan, which would make a substantial inroad into the approximately €700 million in cuts Ms Burton has to make in next month’s budget, has been strongly criticised by business lobby groups.

The proposal to pass on the cost of sick pay was one of a number of cost-saving measures affecting social welfare which were discussed at a special pre-budget meeting of Ministers yesterday. The proposal would take at least a year to get up and running but is projected to save the exchequer €150 million in 2013.

Ms Burton argues that the current system under which the State picks up the tab for most employee sickness is an anomaly, and differs sharply from the practice in many other countries.

Brendan McGinty of Ibec, accused the Ms Burton of "going about this in a way that is anti-employment." Mr McGinty said the measure was one which would "strangle businesses that are already struggling".

“The issue for business here is that it is a straight hit to the bottom line, it is going to increase employer costs in terms of the cost of employment," Mr McGinty told RTÉ radio's Morning Ireland.

Describing the move as a "retrograde step", Mr McGinty said the Government would not achieve job creation and sustainability by passing the cost of social welfare on to the employer.

"This policy will not work, it needs to be rethought urgently," he insisted.

Isme chief executive Mark Fielding said Ms Burton was “living in cloud cuckoo land". He said the Minister "has no idea of how businesses are struggling on the ground, during the worst recession in modern times”.

“Many SMEs are already in dire straits due to additional costs being foisted on them through state controlled increases in transport, energy and local charges. To further add to costs when businesses are struggling to stay afloat, maintain and create employment, is daft. It is as if the Government have a ‘death wish’ for the small business sector,” Mr Fielding said.

Mr Fielding said the business community would fight the proposal "tooth and nail”.

Chambers Ireland also criticised the proposals. "If these reports are true then this proposal runs contrary to Government rhetoric about supporting business and especially smaller domestic economy focused businesses," Chambers deputy chief executive Seán Murphy said.

"This kite flying proposal has come out of nowhere without any consultation with employers. It would be much better for the Department of Social Protection to concentrate on making work pay and developing better labour force activation strategies rather than hammering employers with a fresh round of additional costs at this time."

In preparation for the December budget, the Cabinet yesterday devoted a special meeting to discuss Minister for Public Expenditure and Reform Brendan Howlin’s wide-ranging proposals for reform in the public service.

It is understood that discussion during the seven-hour meeting focused on proposals to reduce the number of State agencies and quangos. Early plans suggested some 102 bodies should be axed or merged, but the number has since been reduced to under 50.

Mr Howlin is also expected to outline his proposals for reduction in public sector numbers on Thursday. One measure is expected to set new levels of annual leave for all existing staff across the public service, ranging from a minimum of 22 days and a maximum of 32.

Mr Howlin is also expected to outline his proposals for reduction in public sector numbers on Thursday. The Government’s target of reducing numbers to 302,000 for 2011 will be easily surpassed, a Government source said yesterday. A year-by-year timeline of reducing numbers by as many as 25,000 by 2015 will also be disclosed, as will details of the strategy for reforming shared services, e-Government; procurement and expenditure reform.

The new measures on holidays being proposed by Mr Howlin’s department will see some staff gain additional days off, many more could lose out. Sources suggested that staff who lose leave arrangements under the plan may be offered a one-off compensation arrangement. This could possibly be 1½ times the level of leave lost.