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Collective agreement on tea deadlocked PDF Print E-mail
Friday, 26 October 2018 09:59
  • Planters say talks with unions at stalemate, insist on Rs. 940 all-inclusive wage hike or Rs. 46 per kilo with Rs. 600 as gratuity
  • Rs. 1,000 demanded by workers feasible only with productivity-based wage model
  • Calls on all stakeholders to compromise to achieve sustainable solution
  • PA not informed of discussions with PM or Minister but ready for dialogue
  • Says RPCs can only provide Rs. 8,000 Deepavali bonus, not Rs. 10,000 demanded by workers

A bearish plantation industry yesterday said they were heading towards a perfect storm, with a dip in production, low prices at auctions and negotiations over a new collective agreement with workers hitting a stalemate, and expressed concerns that the sector may not be able to hit their earnings target for 2018. 


The Planters’ Association of Ceylon (PA), representing the Regional Plantation Companies (RPCs), vehemently held that its membership was not financially able to afford the demands made by trade unions for a daily wage of Rs. 1,000 and insisted on the affordable all-inclusive wage hike of Rs. 940 or the proposed Rs. 46 per kilo with Rs. 600 as gratuity. “Looking at the declining market share of Sri Lanka, downward trend in auction prices, low productivity rates, we are taking a massive risk by offering a 20% increase on the basic wage up to Rs. 600. We stand firm and urge the trade unions to come to a common understanding on this basic fact that as the companies are not performing well it is not financially viable to provide a Rs. 1,000 daily wage,” PA Chairman Sunil Poholiyadde told journalists in Colombo yesterday.

He pointed out that negotiations over a new collective agreement had reached a complete deadlock despite the industry having made three concrete offers, each of which has been rejected by the trade unions who demand Rs. 1,000 per day, including EPF/EFT regardless of productivity.

According to the PA, under the previous collective agreement, workers were provided a basic salary of Rs. 500 in addition to an attendance incentive (AI) of Rs. 60, a productivity incentive (PI) of Rs. 140, a price share supplement (PSS) of Rs. 30 and EPF/ETF of Rs. 75 amounting to a total daily wage of Rs. 805. As of its last offer, the RPCs have proposed a 20% increase on the basic wage up to Rs. 600, a 33% increase in the AI up to Rs. 80 and a 20% increase in EPF/ETF up to Rs. 90, in addition to the PI and PSS, amounting to a total daily wage of Rs. 940. This is an average increase of Rs. 3,375 per month for a worker. 

It was also noted that tea harvesters who are able to bring in harvests above the norm of 16-18 kg will continue to be entitled to ‘over-kilo pay’, which is currently at Rs. 28.75 per kilo in excess of the plucking norm. In this manner, a worker who plucks even three kilograms above the norm can earn a daily pay of over Rs. 1,000. 

“RPCs are not denying a wage increase, however, there must be consideration for financial viability. Most of the companies are not performing due to various internal and external challenges. Rising productivity is an absolute must, which the trade unions accepted at the last negotiations with the inclusion of a productivity incentive in the wage package. Thus, it is critical that the wage is linked to productivity for the sustainability of the industry and the national economy as a whole,” he added.

Stressing that the current wage model was unsustainable, Poholiyadde said the time had come to look at a different model based on productivity and a share of revenue. 

“If the workers were to be given a daily wage of Rs. 1,000 as currently demanded by the trade unions, the only way such value would be at all feasible was if the industry shifted entirely to a productivity-based wage model.”

In the tea sector, he said this would mean that Rs. 46 would be paid for every kilogram of tea harvested, transforming the way a worker would be remunerated from the current model. 

The Employers Federation of Ceylon (EFC) Plantation Services Group Chairman Roshan Rajadurai emphasised that the industry needed to move to a hybrid model which had been proposed to the trade unions to enter into a Rs. 46 per kilo wage hike with Rs. 600 as gratuity.

He highlighted that block plucking schemes that have existed there for generations have allowed workers to earn more. 

“Although there is massive labour migration from the plantation industry, production levels have not dropped, resulting in the workers earning a large amount. Under the block plucking scheme, a worker earns on average from Rs. 40,000-Rs. 50,000, which has helped them increase their quality of life. Going in this direction, we proposed a Rs. 46 per kilo wage,” he stated.

Rajadurai outlined that if the RPCs final offer was accepted, the impact of the increase in terms of gratuity payments alone would be in excess of Rs. 5 billion to the industry, in excess of Rs. 300 million will be added to the cost of production of the RPCs, which has to be generated from their revenue.

The PA also said that in this round of negotiations other commodities such as rubber must also be considered, where the auction prices have rapidly declined to an all-time low of less than Rs. 350, which six years ago was over Rs. 600. The cost of production against the current auction price is around Rs. 75-Rs. 100 higher.

“Considering the high cost of production, it is actually economically viable to import rubber from countries like Thailand and Vietnam at Rs. 200 per kg, while our cost is around Rs. 350. We used to produce 350 million kilograms of rubber in Sri Lanka, but during the past three to four years, we have been able to produce only 75 million kilograms. This was also possible because of the RPCs as they need to provide work for the labourers,” he pointed out.

The PA also said that they have still not been informed of a discussion with the Prime Minister or the Plantation Industries Minister but if they were invited they would be willing to participate and voice their opinion.

“The agreement has not come to an end yet. We will continue our discussions with all concerned parties until we reach a consensus,” said Poholiyadde.

Employers’ Federation of Ceylon (EFC) Director General Kanishka Weerasinghe emphasised the need to understand that there had to be a compromise reached between all stakeholders to achieve a sustainable solution to this matter.

“There has to be a compromise which is good for the industry, companies, workers and the national economy. In 2016 we included a clause foreseeing these issues that included provisions for a new model. There is a clear opportunity to earn more than Rs. 1,000 from the proposed agreement. We hope that unions will offer their support so that we can pass on the benefits soon,” he said.

Weerasinghe asserted that some of the proposals by the PA had been considered beyond their capacity to maintain themselves. 

“It is a huge commitment they has made by keeping faith in their workers’ productivity and contribution. They have taken a great risk because once they sign the agreement all RPCs are bound by the law to adhere.”

Rajadurai said RPCs continue to pay their employees well above the legal national minimum wage of Rs. 10,000 per month. 

“Even now, RPC workers are among the highest paid when compared with the tea smallholder sector and garment industry, where they draw a salary of Rs. 25,000-Rs. 30,000 a month. The tea smallholder sector, despite accounting for 76% of national green leaf production, offers a minimum of Rs. 26 per kilo of green leaf without EPF, ETF, maternity benefits, gratuity, holiday pay, attendance bonus pay, profit share, total maternal care, day care and all the other benefits offered by RPCs to their workers in addition to the compulsory 300 days of work offered per year irrespective of the output of the workers, weather conditions, crop availability and the viability of estates,” he added.  

When asked about the Deepavali bonus for workers this year, Poholiyadde said they could only provide Rs. 8,000 and not the Rs. 10,000 the workers demand considering the gloomy conditions the companies presently faced. 

Rajadurai said it was undeniable that Sri Lanka suffers from the highest cost of production and the largest contributing factor was low labour productivity. 

“We have tried to introduce dynamism into this system through the introduction of productivity incentives that can enhance RPC revenues and thus support sustainable wage increases and investment in modernising operations.”

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