Ring up any company's head of human resources in Dublin and ask whether wages are rising higher than the rate of inflation, and they'll say the same thing: "Who put you through to me? Look, I can't talk about that."

These men and women are in an invidious position. Their payroll bills are rising, they don't like it one bit, and merely to raise this issue ups the ante from both their own staff and future applicants.

But the truth has become impossible to hide. For skilled workers in certain sectors, the 3 per cent salary rise stipulated by Partnership 2000 has become something of a joke; not only have their base-line salaries risen by up to 40 per cent, but new bonus payments and in some cases share-option deals have pushed the real gains even higher.

This trend seems set to continue, as demand for trained personnel intensifies.

For many years, Ireland's dysfunctional labour market was an attractive feature for multinational companies. The IDA used to boast quite openly that firms could find graduates here who would work for half what their US or Japanese counterparts demanded.

Heavy competition for each post, including young people willing to come home from abroad for a job, meant companies recruiting staff could choose the cream, and still pay them less.

Now, that gap is closing. Recruitment agencies, particularly those in the information technology and financial services sectors, say companies are discovering that in a free market, the law of supply and demand is a double-edged sword.

"In some sectors there is a skills shortage, and there is a huge amount of competition for people. In a lot of instances, it is going to the highest bidder," says one recruitment specialist.

In one growing area, call centres, companies are finding that the starting salary a year ago of around £11,000 is now not enough to attract qualified personnel. Most are now offering £12,000, a rise of almost 10 per cent.

The most startling example stems from the panic among companies to reconfigure their computer systems for both the year 2000 "millennium bomb", and the introduction of EMU. The demand for programmers who understand COBOL - software specialists who can re-write the old code - has pushed their wages sky-high, attracting engineers who had moved on to other areas. This in turn has left a shortage of programmers across the sector, pushing general wages higher.

IBM said recently that it would hire another 6,000 software programmers around the world, if it could find them. Of course, the company knows it could find them easily, if it were willing to pay enough. And if the skills shortage continues, perhaps it will have to.

As well as salaries, the retention of workers - finding ways to prevent them moving to a better-paid job somewhere else - has become a major problem for many companies.

"One thing that I have noticed is the huge increase in companies paying bonuses, and that's part of retention," says Ms Liz Neligan, managing director of Computer Staff Recruitment (CSR). "In some sectors, 10 per cent would be fairly standard, then you have profit-sharing as well, in the public companies."

The problem with using a fat bonus as a "golden handcuff" is that once the cash is paid over, the handcuffs are unlocked. So companies are now investing more in their staff, guaranteeing to upgrade and develop skills on an ongoing basis. This, too, is a double-edged sword - while it can engender satisfaction and loyalty, it usually also makes individuals more marketable outside the company.

In the financial services sector, competition among companies for qualified personnel has also become intense.

"It's across the board, from junior accounts staff to the level just before financial controller," one financial recruitment specialist says, "and it is being driven by demand".

Other factors boosting wages include rising house prices in Dublin, he adds: "If you're on £18,000, and the flat you want to buy suddenly costs £80,000, you have a problem."

Ironically, returning emigrants with significant equity from homes bought abroad helped push Dublin house prices to their current levels; now those follow them back to Ireland are demanding higher wages to help pay steep mortgages.

And according to general recruitment agencies, the upward trend is spreading to other sectors, but with wages climbing less steeply. They estimate that secretarial salaries, for example, have risen only at around 5 per cent.

"At the moment, it's an employees market, not an employers market," says Ms Bernie Brady, manager of CSR's administration division. "There's a shortage of good, skilled people and companies are coming more and more to the conclusion that even at the bottom level they are going to have to pay at least an extra £500, probably an extra £1,000, to get anyone to move."

Companies in the financial sector are also trying to offer their administration staff more in the way of extras, such as preferential life assurance or mortgages.

In Paris, the OECD says rising wages, particularly for the highlyskilled, are not unusual. Economists at the think-tank track wages in various industrial sectors across the developed world, monitoring increases and measuring these against inflation.

"We've noticed in a few countries that higher paid workers are getting higher rises than lower paid. In general, the higher the educational attainment, the higher the rises. This is particularly marked in the US and Britain, but it is noticeable in Ireland too," says Mr Mark Keese, a specialist in labour economics at the OECD.

"Skills are more and more in demand, while globalisation has also increased, putting downward pressure on the wages of low-skilled workers," he adds.

With the Republic registering record growth levels, this phenomenon manifests itself through low-skill wages rising at a slower rate than high-skill. But should the Irish economy relent, the low-paid could easily find themselves taking cuts in real earnings, while the better-off continue to receive increases.

This has already occurred in some countries, such as the US, Australia and New Zealand, but has been prevented in continental Europe, probably by higher levels of minimum wage and social welfare payments.