Staff in the civil service should in future have their pay linked to performance rather than automatic annual incremental pay rises, according to the Secretary General of the Department of Public Expenditure and Reform.

Robert Watt said he would like to see a move to a different pay model with a greater link to performance and a move away from incremental pay progression - with less focus on grades, and more on roles.

He said a pay model with a variable pay element would give managers more flexibility to reward performance.

He envisaged a system based on bands, within which the employee would move up or down depending on performance.

He said there were too many grades in the civil service, leading to a structure that was too hierarchical.

Mr Watt also outlined changes to performance management for top civil servants, including secretaries general, who will be subject to reviews of whether they meet targets set out at the beginning of each year.

However, there were no details of any financial sanction in the event of a civil service leader failing to meet targets.

Mr Watt noted that senior civil servants do not receive increments - adding that over time, it would be preferable to have a performance related element of pay for senior leaders - but there are no plans for that as present.

He said that as with others in the civil service, if performance was below par it would become a disciplinary matter.

However, he acknowledged that the existing civil service performance management system was too cumbersome, had too many steps and was challenged every step of the way - adding that the new system would have "teeth".

Mr Watt was speaking at a briefing to outline progress on the amalgamation of civil service functions including human resources and payroll under its shared services programme.

The National Shared Service Office is projecting savings of around €50 million a year once the new functions are fully up and running - with those savings due to materialise in 4 - 5 years time.

NSSO CEO Hilary Murphy-Fagan said moving to shared services and automated functions would free up civil services to engage in more strategic work, or to be redeployed to pressure points across the civil service.