The Villa manager will hold talks with Barry today and propose a hike in his weekly wage from £42,000 to £63,000, offer him the captaincy and add a money-spinning testimonial.
If all that fails, O'Neill might consider a clause allowing Barry to leave the Midlands - for Liverpool, Arsenal or wherever else - next summer if this season fails to bring success.
He revealed: "In my view, Gareth should hang around for one more year to see if we can make the sort of progress everybody wants.
"If that success doesn't happen, I'm sure we'd all wish him well."