Tánaiste Simon Coveney has expressed his profound disappointment that party colleague, Tim Lombard failed to win a seat in Cork South West - a constituency which he described as a "Fine Gael heartland".
Mr Lombard was eliminated on the eight count, with Social Democrat candidate Holly Cairns claiming the seat.
The Social Democrat picked up 3,023 transfer votes on the eighth count from Mr Hayes, giving her a total of 10,078.
Fine Gael senator Tim Lombard fell short, with 9,526 votes, and just 393 transfers from Mr Hayes.
Mr Coveney said he "didn't sleep" following the news of the Fine Gael loss, which came as a heavy blow for the party.
"Cork South West is a Fine Gael heartland", Mr Coveney said.
"Tim Lombard is a very close friend of mine and anybody who is over 2,100 votes ahead of the next person when there’s only one person left to be eliminated rightly expects to be elected, so this was a real shock and the transfers that came through from the Sinn Fein candidate just went in huge numbers to the Social Democrats.
"And fair dues to her, congratulations on winning the seat but I think for the Fine Gael team down there and for Tim Lombard, in particular, it’s very hard to take," he continued.
The final result for Cork South West saw Michael Collins (Ind), Christopher O'Sullivan (FF) and Holly Cairns (SD) claim the three seats, after what transpired to be a very lengthy count at Clonakilty.