Staff at Irish Water are set to receive backdated annual incremental pay increases ranging from 1.5 per cent to 3 per cent as part of interim arrangement until 2017.

Management at Ervia, the parent company of Irish Water, said it would accept the proposals which were put forward by the Labour Relations Commission aimed at resolving a row over a performance payment structure.

Siptu described the proposals as “fair and balanced” and said it will recommend staff accept them in a forthcoming ballot.

Management decided last year not to pay Irish Water staff controversial performance-related awards for 2013 and 2014. Provision for such payments had been set out in an earlier agreement between unions and Ervia in 2012 which sought to generate savings of €34 million over a number of years. This deal ended the traditional system of annual incremental payment increases for staff and also included a pay freeze until 2016.

The Ervia pay model was inherited by Irish Water when it was subsequently established. However, in the controversy that surrounded the utility, the performance-related payments were strongly criticised as representing a bonus culture in the company.

The non-payment of the performance payments was referred by trade unions to the Labour Relations Commission.

In its finding, the Labour Relations Commission recommended the Ervia pay model should apply in full in Irish Water from 2017. In the meantime, an interim arrangement should be put in place.

The Labour Relations Commission criticised the company for resiling from the 2012 deal, particularly as it continued to argue the pay model introduced at that time was the correct one for the organisation.

The commission pointed out a recent independent review of the pay model commissioned by Ervia had confirmed this system continued to be appropriate.

The commission said it had put forward its new proposals as a means of rectifying an impasse which had arisen in relation to the payment of the performance-related awards and given that “employees in parts of the company havebeen denied elements of their legitimate pay aspirations over an extended period”.

Under the LRC recommendation, staff at Irish Water will revert to receiving annual increments dating back to January 2014 and running until the end of 2016. These increments will range from 1.5 per cent for lower-paid grades to to 3 per cent for other personnel.

The commission has urged arrears should be paid to staff before the end of 2015.

The recommendation says the pay-related award element of the Ervia pay model “will therefore not apply to employees in Irish Water for this interim period to the end of 2016 and the increments which are applied to Irish Water employees during the interim period will be withdrawn when these employees revert to Ervia pay model with effect from January 1st, 2017.”

Ervia said it would accept the Labour Relations Commission proposal while Siptu said the document represented a fair basis for a settlement.

The consultant’s report on the pay model in Ervia, commissioned by the company, found it delivered value for money and sustainability and did not encourage or enable excessively high levels of pay.

It found the pay model as designed in Ervia was appropriate for a “start-up” utility such as IrishWater.

“Median employee pay in Ervia broadly equates to the market lower quartile. There is no evidence that a so called richly rewarded ‘bonus culture’ is in operation.”

“Pay levels in Irish Water are lower, in many cases, than in other parts of the Ervia group,” the report said.