But the Government decided to delegate responsibility to departmental secretaries and agency CEOs to determine appropriate levels of compensation for their workers.

The cost of any New Year's Eve incentives would be absorbed by the departments' existing budgets unless they could prove exceptional circumstances, said the Premier, Mr Steve Bracks.

The Government also failed to announce whether any extra public holidays will be gazetted over Christmas-New Year, with unions keen to secure the same 11/2 days of extra leave granted in NSW.

The announcement followed a warning from the State Opposition that the pay claim would cost the Victorian Government up to $100 million and comes amid mounting pressure from business for a demonstration by the Government that it is not beholden to the unions.

The secretary of the Victorian Trades Hall Council, Mr Leigh Hubbard, said yesterday that the Government had "wimped it", arguing its "non-decision" was extremely disappointing and was something the former Kennett Government would have done.

He said the move was likely to disrupt essential services such as police, fire, child protection and nursing over the New Year's Eve weekend because there was not enough time left to negotiate individual arrangements and many workers would just decide to make themselves unavailable without the extra incentive to work.

Mr Hubbard said that while the union movement was unlikely to take the matter further at this stage, it did send a bad message to them and to public sector workers in particular, who were suffering from extremely low morale.

"We're not going to go to war over this," Mr Hubbard said. "But this is a recipe for leaving many emergency services uncovered for the period."

He said it was ironic that Mr Bracks had rejected the framework pay claim when the newly privatised tram services had approached the unions for an industry-wide deal.