Remuneration for the most senior employees is likely to fall as a result of the new legislation, as companies will be required to pay higher wages and better benefits to people at higher levels of the organisation.
The new legislation was introduced in the Queen’s Speech last week and it has been widely welcomed by senior staff, including executives.
It was announced by Taoiseach Enda Kenny in an address to the nation.
The legislation is designed to ensure that those with a higher remunerations package get paid more and more.
The Government is now considering changes to the definition of a senior manager.
The bill requires senior managers to earn more than €100,000.
There is also a new salary cap of €40,000 for those who manage over €100 million.
However, those in management roles will be exempt from this requirement.
The government said the new salary caps will be enforced at the highest levels of management.
This includes senior executives.
Under the new rules, the top salary will increase by an average of 2.5 per cent per year and the average annual remunerated bonus will rise by an additional 1.8 per cent.
These will mean that a senior executive at a large company earning over €10 million will earn €6.7 million, a senior senior executive earning over 2.2 million will receive €7.9 million and a senior exec earning over 1 million will be paid €7 million.
Those in the highest paid groups will also be paid an extra 2.4 per cent of their base pay, while the top earners will be able to claim an additional 2 per cent in their base salary.
The minimum annual remortgaged pay is now set at €18,000, and the annual base salary is set at between €40 million and €50 million.
The pay rise will apply to executives at a company of more than 1,000 employees, while there will also need to be a cap on the amount a person can earn in total, as well as an annual limit on the number of employees that can be in a company.
The salary cap will apply for up to six years.
There will be a limit on senior executive salaries, but it will not be as large as the cap for managers.
There are also provisions to exempt certain people from the salary cap.
The Irish Times understands that the Government has decided to reduce the threshold for the annual cap from €80 million to €40.4 million.
While the salary rise will be effective from next year, there will be no change to the cap.
Employees will have to make their annual payments by 31 March, unless the pay package has been reduced to meet the salary limit, or they can make a voluntary payment.
However there will still be a ceiling on the maximum annual pay.
The salaries will rise to €55 million by 2020, €55.5 million by 2021 and €65 million by 2022.
The total annual pay will then be capped at €70 million by 2023.
It is expected that employees who are paid under this ceiling will receive an additional €1.7 billion in bonus payments.
The number of executives who will be entitled to a bonus payment is also set at an additional one per cent annually, with bonuses set to rise by 0.5 percentage points every year.
This means that executives at companies with a turnover of €50 billion or more will get bonuses of €2 billion or $3 billion a year.
However the Government will allow the pay cap to be breached for executive remunerating packages in some circumstances, such as when executives are at the same level of the company.
However it is expected the bonus payments will be capped.
These include executive remortgage, incentive pay, bonuses and severance packages.
The State has a €40 billion remortganisation fund, set up by the State to pay remunerative bonuses to senior executives and to incentivise them to work in the public sector.
There have been a number of reports that the pay rises announced by the Government are unfair.
The Department of Jobs, Enterprise and Innovation has confirmed that it is not considering changes in the pay scheme in light of the Government’s announcement.
In a statement, it said that the salaries of senior executives are set at the minimum level to which they can aspire, and that these are set in advance and are based on the merit of the remunerator.
It said that a company with more than 500 employees can still expect to receive a bonus of €4 million per year.
It also said that, as with other forms of remunerary compensation, the Government believes that the salary ceiling should be set at a higher level, with an annual cap.