Mr. Barry O'Brien:

First, I would like to provide some context. I am conscious this is only the committee's second opportunity to deal with some of the issues. The key finding of our internal audit, which has been published, was that there is no standardised approach to pay in regard to section 38 agencies. The key driver for us, and for me as the person responsible for implementing the 22 recommendations, is to bring about standardisation.

The position is that we have gone through a detailed process, having regard to due process and natural justice for individual employees, and are now at a situation where we are not too far away from full compliance with public pay policy. The internal review group mentioned by Deputy Ó Caoláin issued a comprehensive set of recommendations providing that almost all the allowances would cease to ensure full compliance. However, we are trying to remain consistent with what pay policy allows. It allows an employee or organisation to make a submission to us for consideration, which may then be forwarded to the Department of Health or the Department of Public Expenditure and Reform for red circling for the particular individual or organisation only.

It is important that people understand what we mean when we talk about red circling. The best way to describe it is to say that red-circling has its origins in an industrial relations arena where people are negotiating significant reform and change. For example, if everybody must change from next Monday, but three people have something that prevents them from changing, the decision is made to red circle those three people. Then when those people retire or leave the job, the red circling ceases.

In this instance, we have received 67 business cases, which are basically contractual evidence that clearly says the section 38 agencies have entered into contracts of employment with the individuals which give them the rate of pay, which may be basic pay inclusive of allowances or a specific rate of pay. Since these are public servants and fully funded by the taxpayer and having received legal advice we were likely to lose any case and have damages awarded and the contract upheld, it is only prudent that we take the view that rather than incurring significant potential legal costs, we should engage with the Department of Health and the Department of Public Expenditure and Reform to propose that based on a legal contractual basis there is a sound rationale for red circling this small group of individuals. This is being proposed on the basis that the organisation in which that person is working is fully aware that the next time it fills that job, it will be at the approved rate. This is not red circling in perpetuity, but is specific to an individual, depending on the length of contract. Notwithstanding this, there are other safeguards built into the pay policy. Even where people have allowances for carrying out a certain function, policy now requires a review of these allowances every five years to check whether they are still relevant to the job.

We are now going through this process. We will engage with the Department of Health and inform it of cases where we have contractual evidence that in our view provides a sound basis for red circling a small number of individuals.