An arbitration board has rejected Government proposals to reduce privilege days for civil servants.

The Government had argued that reforming the system would save €4.6m a year and increase productivity.

However, the board found that the employer side had failed to demonstrate significant savings consistent with the transformation required.

The two privilege days will now be converted into two additional days of annual leave for civil servants.

It is expected that the Government will now proceed to try to address the issue of privilege days and leave across the public service, instead of just within the civil service.

Under British rule, civil servants in Ireland were entitled to additional days leave each year called privilege days - one to mark the King's birthday, and one to mark Empire Day.

Following independence, civil servants retained the entitlement to the two privilege days - one at Christmas, and one at Easter.

However, as part of the Croke Park transformation process, the Government wanted to abolish privilege days.

Senior staff receiving 30-31 days annual leave would have lost privilege days completely.

Staff entitled to between 25 and 29 days annual leave would have converted one privilege day to an extra day's annual leave.

Those with below 24 days annual leave would have the two privilege days converted into two additional annual leave days.

Unions had argued the move would not improve service for the public, as there was already a tradition of civil servants covering for those on leave.

They also warned the Government proposals would distort existing differentials between different grades and could trigger future industrial relations difficulties.

However, the arbitration board chaired by Senior Counsel Turlough O'Donnell found that the Government had not demonstrated that significant savings would be made.

It said the change would create a sense of grievance disproportionate to any gains that might accrue.

It also pointed out that converting privilege days into annual leave entitlements could widen the gap between the civil service and the rest of the public service, and create a barrier to an integrated public service.

However, the arbitration board said that the ruling should not be regarded as a setback for the Government.

It said the issue should be addressed on a public service wide basis, rather than dealing with it in a piecemeal fashion.

They made no judgment on the substantive issue of the appropriate amount of leave days in the civil or public service.