The Minister for Enterprise, Trade & Innovation has established an independent review of the system of setting legally binding sectoral wage agreements.
For some time employers have criticised the system, saying it is unaffordable and damages competitiveness.
The review will be carried out by the chairman of the Labour Court, Kevin Duffy, and Dr Frank Walsh, lecturer in economics in UCD.
Under the statutory wage fixing system, employers and unions in sectors ranging from construction to hairdressing negotiate legally binding agreements on wages and terms and conditions for employees in their sector.
The Government had committed to review the mechanisms, known as Employment Regulation Orders and Registered Employment Agreements, in its four-year plan, and in the joint EU-IMF programme for Ireland.
A statement from the department said the appointments of Mr Duffy and Dr Walsh had regard to the need for an independent review to draw on particular knowledge of wage setting mechanisms and independent economic expertise.
Minister Mary Hanafin said the Government had to ensure that statutory wage fixing mechanisms did not have a negative impact on economic performance and employment levels.
She urged interested parties to submit their views on the continued relevance, fairness and efficiency of the current ERO and REA mechanisms. The review is to be completed within six weeks of the closing date for receiving submissions, which is February 25.
Employers' group IBEC said the review was an important opportunity to carry out 'much-needed and far-reaching reform of the labour market'. It added that the handling of the review's findings would be a key test for the next government.
'The current system is at odds with the economic needs of the country,' IBEC director Brendan McGinty said.
Chambers Ireland also welcomed the move, with chief executive Ian Talbot describing it as long overdue.
The Irish Congress of Trade Unions also welcomed the review, describing it as 'a real opportunity to refute the ideological attack on incomes that was launched by the outgoing Government'.
But general secretary David Begg questioned the involvement of EU institutions in the process, saying EU law did not allow their involvement in wage setting at a national level.
