The Low Pay Commission is understood to have recommended increasing the basic pay rate to at least €13.70.
Its proposal would help the Government deliver on a commitment to replace the minimum wage with a new living wage in two years.
But the move is a headache for the Coalition, which has been seeking to reduce costs for businesses in the aftermath of record levels of inflation.
It has never rejected a recommendation from the commission, but there is increasing concern about handing struggling businesses another financial burden. Government sources confirmed the commission proposed a more than €1 an hour increase, but less than €1.20.
The Government aims to replace the minimum wage with a new living wage by 2026. It will be set at 60pc of median wages across the economy.
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Employers are legally obliged to pay at least the minimum wage to their staff, and it is paid to an estimated 164,000 workers.
Enterprise Minister Peter Burke is believed to be concerned about the impact a further increase in the minimum wage will have on businesses, which are already facing the additional costs of the introduction of auto-enrolment pensions, an extra bank holiday and statutory paid sick leave.
“The minister is very keen to slow down the train of additional costs and regulations businesses have been forced to deal with over recent years,” a government source said.
The minister has made a series of proposals as part of his budget submission to Finance Minister Jack Chambers, which would ease the burden of government policies and regulations on business, especially SMEs.
Mr Burke wants to delay the proposed increase in paid sick leave from five to seven days, which is due to come into effect next year. He also wants to see an extension of the Government’s Increased Cost of Business (ICOB) grant scheme, which has seen more than 80,000 small and medium businesses receive payments totalling €200m.
The minimum wage will stay in place until the living wage is phased in.
In 2022, former tánaiste and enterprise minister Leo Varadkar announced the introduction of a national living wage for employers.
The first step towards the new living wage was an 80c increase to the national minimum wage from January 1 last year to €11.30 an hour. This was followed by a 12.4pc increase of €1.40, bringing the minimum wage to €12.70 last January 1.
At the time, Mr Varadkar said improving terms and conditions for workers must be one of the legacies of the pandemic. He said as well as minimum-wage workers, many more employees would feel the benefits of knock-on increases as a result of the changes.
The introduction of a living wage is an important step the Government is taking towards eradicating low-wage employment
Research by Maynooth University for the commission found that a wage floor of 60pc of the hourly median wage could raise wages without a negative impact on hours worked and employment.
Once a living wage is in place in 2026, the Low Pay Commission will examine the possibility of increasing it further to 66pc of the hourly median wage.
In response to a question from Labour Party TD Ged Nash in April, Mr Burke told the Dáil the Low Pay Commission estimated the minimum wage in 2022 was 50.9pc of the median hourly wage.
It rose to 51.8pc last year. The commission estimated that the €1.40 increase in the wage this year brought it to 55.1pc of median hourly wages.
Mr Burke said the commission would continue to make annual recommendations on the appropriate rate of the national minimum wage and the increases required.
He said the introduction of a living wage is an important step the Government is taking towards eradicating low-wage employment for all workers and it is on track with its implementation.
The minister said it is also important to acknowledge the challenges facing the enterprise sector.
Meanwhile, the Government also faces a demand from the Irish Congress of Trade Unions (Ictu) to scrap lower minimum-wage rates for younger people.
The Low Pay Commission recommended this earlier this year.
In its pre-Budget submission, Building a Better Future, Ictu calls for the state pension and welfare payments to be linked to average earnings. It wants the state pension to rise by up to €25 a week in the Budget.
Ictu general secretary Owen Reidy said state benefits should be benchmarked and keep pace with inflation to avoid the “usual annual horse-trading”.
The submission says there should be no tax cuts. It calls for workers’ flat-rate expenses regime to stay in place and an increase in an “eating on site” allowance from €5 to €6.20 a day to reflect inflation.