Thousands of hospital consultants are set for significant pay increases as their breach of contract case against the Health Service Executive and the State has been settled.

The deal will cost the State €187m in retrospective payments, and will add €62m to the annual consultant pay bill in future.

The 700 consultants who have already lodged breach of contract cases in the courts will get back money of up to six years prior to the date of filing their legal claims some years ago.

Those who have not yet formally lodged claims but who experienced a similar breach of contract by Government will receive a maximum of six years back money in total.

The deal will not apply to those recruited after 2012.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

At the High Court, lawyers for the consultants involved in the ten lead cases said they wished to convey a "sense of relief" and a sense that, although they were encouraged that justice has been done in their cases, the settlement is to affect a great number of others.

Senior Counsel John Rogers said the 2008 contract was "quite a visionary document", a feature of which was to recognise the need for clinicians to be involved in the running of the health service.

He said the settlement would give rise to a "new dawn and a new vision that the objective of the contract be fully realised". He also said the contracts were being operated every day.

The court was presented with the detailed terms of the settlement and was asked for declarations that the plaintiffs be entitled to corrected remuneration, retrospective payments as per the terms of the settlement along with all costs.

Ms Justice Úna Ní Raifeartaigh said she welcomed the settlement and praised the "extremely hard work" done behind the scenes to achieve the settlement.

She said it was a very difficult situation that arose with the contracts followed by the financial collapse of the State.

Today's agreement had saved another four to six weeks of expensive court time, she said.

The Taoiseach has said defended the decision by the State to fight the case.

"If we didn't the bill could have been in the region of €700m," Leo Varadkar said. "As a result of this settlement it's going to be a fraction of that."

Mr Varadkar said that as part of the settlement, consultants have committed to working with the Government "on new measures to ensure that they are honouring their side of the agreement by spending time in public hospitals seeing public patients".

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

Minister for Finance Paschal Donohoe has said the agreement needs to be "fair and safe for the taxpayer".

Speaking on RTÉ's Today with Sean O'Rourke, he said: "The arrears in relation to this were at one point in excess of €700m and the development of this into the future will pose a truly huge difficulty to the ability of the State for example to put together a budget to deal with other service pressures.

"I have been involved in the matter over the past 18 months in particular and my objective is to reach a fair and effective agreement on the matter."

In a statement, the Department of Finance said the estimated costs as a result of the settlement was €182m for arrears, and ongoing costs of €62m per annum from 2019, backdated to date of settlement in June 2018. 

The arrears will be phased over 2019 and 2020.

The first 40% will be paid early in 2019, while the remaining 60% will be paid by June 2020. 

These payments will occur alongside the pay restoration provisions under the progressive unwinding of the financial emergency (FEMPI) cuts imposed during the economic crisis.

Sources estimated that the deal will increase the pay of a so-called Type A consultant - who only does public sector work - from around €180,000 to €252,000 by 2022, when the unwinding of FEMPI is also taken into account in addition to the settlement.

Type B consultants who are permitted to do limited private practice would see salaries rise from around €170,000 to €225,000 by 2022. 

HSE sources stressed that the decision to withhold the consultants’ contractual entitlement to a promised pay rise in 2009 had been a Government decision based on the critical state of the economy at the time and that it had required a Government decision to reverse it.

The Irish Medical Organisation has welcomed the settlement, saying it "has been a particularly divisive issue for the health services in Ireland".

However, in a statement the IMO said it is "extremely disappointed" that the settlement fails to address the issue faced by consultants hired by the HSE since 2012.

"The IMO will continue to pursue a solution to this injustice such that colleagues doing the same job with the same qualifications and responsibilities should get the same rate of pay.  The current position is simply unsustainable," it added.

Additional reporting: Vivienne Traynor