WHEN is a pay cut not a pay cut? If the unions and the government can work out the answer to that question between now and next Thursday, then it is just possible that not only will the next strike day be deferred, but social partnership may yet be rescued.

Whatever happens in the next 10 days, come 9 December, finance minister Brian Lenihan will announce a reduction of €1.3bn in the public-sector pay bill.

Up to recent days, it had been widely assumed that, despite on-going negotiations between the government and the unions, this would come from an across-the-board cut in public sector pay of between 5% and 10%.

However, there are optimistic, if still somewhat muted, soundings coming from the social partners that it might just be possible to agree a deal that will give both the government and the public-sector unions what they want.

At first glance, it appears fanciful. The government needs a 6.5% reduction in the overall public-sector pay bill. The unions, meanwhile, have organised the biggest strike in the history of the state and rejected out of hand the possibility of pay cuts. And never, it seems, the twain shall meet.

But as ever with industrial relations, particularly in the black art of public-sector pay negotiations, nuances come into play that offer the potential to bridge the seemingly yawning gap between the two sides.

The intervention on Tuesday of Peter McLoone, the general secretary of the Impact trade union, could yet come to be seen as a decisive turning point.

McLoone said publicly what union leaders have acknowledged privately for some time: that the public sector pay bill would have to come down and that "it would be necessary to agree some temporary measures to cut payroll costs in 2010" as reforms proposed by the unions were unlikely to deliver the necessary savings before 2011.

Asked whether this could include cuts in overtime rates or allowances or the introduction of short-time working, McLoone said the government had indicated these would be on the table.

The comments caused some irritation among public sector workers, with some questioning what the day of action had been about if the union leadership was willing to accept cuts in payroll costs. The point was also made that the workers McLoone represents in Impact would have little overtime or allowances and that the unions representing frontline staff, such as nurses or fire fighters mightn't be so accommodating.

But others believe that, behind the scenes, there is a deliberate and united strategy among the unions and McLoone's comments simply reflected that. Up until recent days, the assumption was that whatever the unions had to offer would be nowhere near enough to produce the required savings of €1.3bn. "It's a couple of years too late," was the biting verdict of one government source.

But after more than two decades of concluding deals, the social partners have learned a trick of two when it comes to meeting in the middle.

The talks only really got down to business when the unions accepted the need for "some temporary measures to cut payroll cost in 2010", while Taoiseach Brian Cowen accepted that such measures need not involve a cut in basic pay but only as long as they reach €1.3bn next year.

Temporary measures being considered include compulsory unpaid leave of up to 12 days a year which would equate to a 5% cut in pay and some reduction increments for the '9 to 5' public servants.

For the frontline staff such as nurses, gardaí, fire fighters, overtime at flat rates as opposed to time and a half and a core working day from 8am to 8pm which would cut back on unsocial hours payments, are also on the cards.

The idea is that these "temporary" measures will apply in 2010 during which detailed negotiations will be held to agree radical reform of the public service which will yield the same level of savings in 2011 and beyond.

The stick for the unions is that if they don't agree to these cash saving reforms, then the temporary measures will continue to apply past 2010. The carrot is that if they do then the temporary measures will be lifted.

The talks are entering a critical phase this weekend with union observers suggesting that if 'white smoke' doesn't emerge by the early part of the week, then the planned day of action on Thursday will go ahead and the unions will by then be on an irreversible collision course with the government.

The stakes are high on both sides. For the unions, a deal with the government will see the unpalatable temporary measures lifted next year while they will have a say on the reforms rather than having them imposed upon them. Further on, an agreement this week will almost certainly set up a new national partnership agreement which the unions have been seeking for some time.

For the government, a deal will avoid a messy conflict with the unions and present Ireland to the world (and its bankers) as having secured a rescue package which has the backing of all the main players.

A problem for the unions is whether they can sell what is some fairly unpalatable medicine to their members who still believe they were duped last March into accepting the 7% levy with nothing more than a few sporadic lunchtime protests.

Last Tuesday's strike released some of that pent up anger, but it is debatable whether the members have the appetite for more.

The feeling among the unions is the impetus is towards a deal, though union sources have stressed that the pain will have to be equally spread between the '9 to 5ers' and the 24/7 frontline staff if the unions are to give the collective nod to Lenihan and Cowen.

As one union observer noted, whatever about reaching a deal with government, the real problem may be agreement among themselves.

Another problem for the unions is that, even if a workable deal emerges early this week, there won't be time to put it to the members before Lenihan rises to deliver his budget on 9 December.

As such the union leaders will want a very substantial statement from Cowen or Lenihan, not just platitudes, to allow them to give the nod on behalf of their members.

The signals from government are cautiously positive that some kind of deal can be cobbled to together by the middle of this week. "There is progress but it's hard to know at this stage if it's enough [to get to €1.3bn]," was the verdict of one source very close to the talks.

The reasons for caution are obvious. Despite all the innovations, getting to €1.3bn by methods other than simply cutting pay will be an enormous challenge. Even if it can be done, there remains doubt as to whether union leaders can sell it to their members.

The union leadership understands the harsh realities. The money simply isn't there to continue to fund a pay bill of €20bn. And ultimately it wants (and needs) to be involved around the negotiating table when real reforms are due to introduced in the public sector over the next five years. The real challenge for the leadership is to convince their members that a short term "temporary" sacrifice is the necessary price to be paid for that long-term influence at the negotiating table.

If it doesn't succeed, a long winter of discontent awaits.