The Employers' Federation of Ceylon

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Thursday, 27 March 2014 15:25
The Employers’ Federation of Ceylon (EFC) is the only registered Employers’ Trade Union (Registration No.1) under the Trade Unions Ordinance of 1935. It was established in 1929, as an Employers Organization, dealing with employment and industrial relations issues on behalf of Employers. The EFC has, over the past 85 years, promoted the interests of Employers within the framework of the law in Sri Lanka. This has given it the credibility and the acceptance of all stakeholders in employment, namely, the government, trade unions, employers and the public at large.
The EFC is the Employer Constituent of the International Labour Organization (ILO) and a member of the International Organization of Employers (IOE) and the Confederation of Asia Pacific Employers (CAPE). It was responsible in setting up the South Asian Employers’ Forum (SAFE) and co ordinates its activities among the group.
Currently, the EFC has a direct membership of 568 subscribed employer members  representing different sectors, such as services, manufacturing, exports, plantations, IT and BPO industries,  hotels and tourism, Banking etc. Indirectly, through its Affiliated Associations it represents over 2000 employers.  The majority of its members are in the private sector and therefore, our representations will mainly focus in relation to this sector.
 Limits of the Mandate given to the National Pay Commission
in relation to the Private Sector
It is noted that the National Pay Commission has been established by a Presidential Directive and a proclamation made by His Excellency the President, Mahinda Rajapaksa in terms of the gazette notification published in the government gazette No.1835/12 of 5th November 2013. This proclamation makes reference to the members of the Pay Commission as well as the mandate given to it.
The following specific areas as set out in the gazette notification, in the context of the private sector, needs to be highlighted:
01. Need to make the employees of the public sector as well as the private sector a contented and motivated lot.
02. To recommend to the government from time to time specific salaries and wage revisions in order to prevent officers with professional qualifications and competence from leaving the public service to take up appointment in the semi government and private sectors.
03. To make recommendations to the government guaranteeing an appropriate minimum salary to those employees in the private sector, security of their employment  and availability of essential welfare amenities they are entitled to thereby implementing government policy of their welfare as enshrined in the Mahinda Chintana policy statement.
These are the only references made to the Private sector in the gazette notification.
1. Making Employees of the Public Sector and Private Sector a Contented and Motivated Lot[1]
In this context, it is important for us to understand the distinction between “public service” and the “private sector” in relation to motivational factors vis-à-vis its employees.
‘Public value’ dictates that public services are distinctive as are characterized by claims of ‘rights by citizens’ to services. In the modern context, these services have been authorized by the ‘public’ through a democratic process and funded through related processes. It is for this reason that those in public service are set to work at the ‘pleasure of State’ or its organs and permeate to the grass-root political organizations such as the local government authorities in Sri Lanka. Today, its numbers have reached unimaginable proportions. Sri Lanka is known to have one of the largest public sectors in the world!
The private sector, on the other hand, operates differently with a desire to maximize profits and shareholder value. Since the liberalization of the Sri Lankan economy in the late 1970s, every successive government has called the private sector to function as the engine of growth. The private sector responded to this call and has driven the Sri Lankan economy forward amidst much adversity and under rugged and least lubricant conditions. Many criticize and characterize the private sector as a profit seeking and exploitative animal, but few pause to take cognizance and appreciate the role performed by the private sector of Sri Lanka to grow the economy and to facilitate the good living conditions of which Sri Lanka can be proud[2].
The success of the private sector has been that it has embraced a culture of performance management, notwithstanding the fact that the legal framework that governs employment in the sector is still archaic and outdated. Employees in the private sector are given the opportunities to innovate, think on their own and make use of their talents and skills for the benefit of the Organization. It encourages a culture of organisational and personal growth.
In the above circumstances, a comparison of the two sectors would be similar to comparing “apples” with “oranges”.
2. Mechanisms to prevent migration from Public to Private Sector[3]
The gazette notification stipulating the mandate given to the National Pay Commission also highlights that it should recommend to the government from time to time specific salaries and wage revisions in order to prevent officers with professional qualifications and competence from leaving the public service to take up appointment in the semi government and private sector[4]. This acknowledges a concern in the wage fixation mechanism in the public sector and also accepts that there is an attraction or a movement of professionally qualified competent officers to the private sector from the public sector.
At executive and managerial level, the private sector adopts a performance based evaluation system in granting increases in wages and benefits to employees. More and more employers have begun to believe and accept that having a transparent performance management system and implementing it in a fair and reasonable manner is the only way to secure and retain good talent within an Organization.
One of the fundamental issues that the government needs to address in looking at public sector wages is the fixing of a wage to the position with restrictions on granting higher wages depending on qualifications and experience. For example, when a massive restructuring operation has taken place and a Company replaces important managerial positions, you cannot expect the Company to offer the same terms offered to the Manager who held this position earlier. The Company needs to make a business decision in such a situation. This is something that is not possible in the public sector. Fixing of the wage should necessarily be tied up with not only the position but also the person vis-à-vis his or her value addition to the Organization.
3.  Recommendations to government on minimum Wages to the Private Sector[5]
This is the most important aspect of the mandate vis-à-vis the private sector. There are two important elements in this paragraph which we need to consider. 
a.      The Ten Year Horizon Development Policy of the government – Mahinda Chintana – What does the labour policy articulate ?
b.      The concept of a minimum wage - should we follow it ? or what are the alternatives ?
( i )‘Mahinda Chinthana’ – Ten Year Horizon Development Framework
 Chapter 11 of the Ten Year Horizon Development Framework articulates the Labour policy of the government. As soon as this policy was released the EFC fully endorsed it by confirming that the Policy directives identified are the most appropriate to create an enabling environment for employment creation in Sri Lanka. In fact one of the 4 policy directives refer to enhancing productivity and skills.
 In the circumstances, we need to note that productivity enhancement should be firmly embedded in our wage policy in line with Mahinda Chinthana.  Furthermore, this policy underlining the Vision for the Sector states : “ There are several areas in which National policy needs to take a fresh approach such as changing from a traditional, obsolete labour policy to a growth oriented and investment friendly labour market led approach ensuring a decent work environment and a vision for all workers in Sri Lanka.”[6]
(ii) The Concept of a Minimum Wage
The issue of the minimum wage is controversial. Many argue that it is too blunt an instrument to be useful and could have detrimental effects on employment, growth and incentives to work, and that it can negatively impact opportunities for lower skilled workers and the youth. Supporters of minimum wages conversely argue that it is an effective instrument in protecting the lower paid and in combatting poverty.
Minimum wages are essentially labour market interventions used by governments, either as an instrument of political macro economics or as a social tool. Minimum wages represent the lowest levels of pay, established through a minimum wage fixing system, to be paid to workers by virtue of a contract of employment.
 The concept of minimum wage can be broadly distinguished into two categories. First is the adoption of a National minimum wage which is applicable to all workers across regions and sectors, irrespective of the peculiar capacities of different industries. On the other hand, minimum wages could also be fixed in relation to different industries, as in the case of Sri Lanka in terms of the Wages Boards Ordinance. In such a situation it is envisaged that minimum wages be fixed taking into account the nature of the industry and its peculiarities.
The general objective for governments introducing minimum wage policies is the protection of low income workers, through the introduction of minimum wages based on country specific factors such as cost of living, welfare policies, labour market conditions, the inflation rate and other economic factors and trends.
There are both benefits and drawbacks in relation to the fixation of minimum wages. The benefits include reducing wage inequalities between the bottom and the middle of the earning distribution, poverty reduction, mitigating the effects of possible imbalance of bargaining power between employers and workers. On the other hand, the drawbacks are diverse. Minimum wages are widely seen as having a distortionary impact on the labour market. For example, minimum wages that are set too high can lead to unemployment among low skilled workers. Although minimum wage legislation should be applied to all workers covered, it is difficult to enforce in the informal economy. This is something that we in Sri Lanka need to take into account. The role of minimum wages in many developing countries as a means to establishing a social flow is therefore much more questionable.
According to the World Bank publication, Labour Regulations in Developing Countries A Review of the Evidence and Direction for Future Research” (World Bank, 2008) many countries try to improve the welfare of low-wage earners, through the mandating of paid minimum wages but: “Whether such a policy actually achieves the intended outcome has been a subject of great controversy for decades. Theoretical predictions of the effects of minimum wages vary, and the empirical evidence has so far yielded contradictory results, depending on the country, the source of minimum wage variation, the methods of analysis, and the assumptions required for each particular econometric framework.”
The IOE expresses the view that “minimum wages, like all policies have winners and losers that warrant the need to access carefully whether they achieved the intended objectives …. and, therefore minimum wages should not be promoted as a singular policy response.” The IOE considers that from a policy perspective, rather than consider minimum wages as the best way to tackle the challenge of low wages, efforts should be made to help enhance productivity. It also considers that this is particularly important because minimum wages could have repercussions, which lead to decreased labour market experience, diminished on the job training and skills acquisitions, decreased motivation for education attainment, reduced productivity and a vicious cycle of wage-push inflation. [7]
(iii) Minimum Wages in International Regulation
The ILO has adopted the following Conventions and Regulations:
·         The Minimum Wage Fixing Machinery Convention (No.26) and Recommendation (No.30), 1928.
·         The Minimum Wage Fixing Machinery (Agriculture) Convention (No.99) and Recommendation (No.89), 1951.
·         The Minimum Wage Fixing Convention (No.131) and Recommendation (No.135), 1970.
It is extremely important to closely scrutinize the provisions of Convention No.131 of the ILO concerning minimum wage fixing with special reference to developing countries. This Convention came into force on 29th April 1972. Article 3 of the Convention refers to the elements that should be taken into consideration in determining the level of minimum wages. It specifically refers to economic factors including the requirement of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment.
 The Convention states[8] that a member who ratifies the Convention shall create and/or maintain machinery adapted to national conditions and requirements, whereby minimum wages for groups of wage earners covered can be fixed and adjusted from time to time.
The above provisions very clearly show that there is no ‘one size fits all’ approach in having or not having a minimum wage fixation policy. Furthermore, even if it is decided to have a minimum wage fixing mechanism, the Convention is very clear and provides that such a minimum wage can vary from worker to worker, industry to industry or region to region. There is nothing to suggest in the Convention that one should adopt a uniform national minimum
wage. This is clearly evident from what has been set out in Article 3 to the Convention in relation to the elements that need to be taken into account for minimum wage fixation.
The Universal Declaration on Human Rights, 1948 provides in Article 23, paragraph 3 that : ”Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection”.
The Concept of the Living Wage
The concept of the living wage has been increasingly referenced. However, the concept is problematic, especially for employers, as:
·         Basic needs of workers and their families are diverse and potentially difficult to define and measure;
·         It is not the responsibility of employers to meet the basic needs of workers. This is the role of governmental social protection policies, to which employers already directly contribute.
The second reason highlighted above is extremely important from the context of a Single Employer in the private sector. Wages cannot be directly linked to cost of living or inflation as it can be totally counter productive. We cannot expect employers with different affording capacities to increase salaries on par with COL increases.
We have noticed a progressive move towards moving out of cost of living Payments in the private sector collective bargaining agreements ever since the COL index began to change in May 2008. We do appreciate that COL and inflation do have an impact on the worker. It also has an impact on the Employer. Therefore, although it would be proper to note the increasing trends of these elements, we cannot expect wages to be increased in similar proportions. This is the fundamental issue that many people do not seem to accept.
Evaluation of the current Wage Fixation Mechanism under the Wages Boards Ordinance
The Wages Boards Ordinance is one of the oldest pieces of legislation that has been enacted for the regulation of the wages and other emoluments of persons employed in trades, for the establishment and constitution of Wages Boards and for other purposes connected with and incidental to the matters aforesaid. In terms of the Wages Boards Ordinance, the Hon. Minister of Labour and Labour Relations is empowered to establish a Wages Board in respect of any particular trade. Currently, there are 44 Wages Boards that have been established under the Wages Boards Ordinance. In terms of section 9 of the Wages Boards Ordinance, the Minister is empowered to appoint Employer representatives and Worker representatives engaged in such trade and nominate members in respect of every Wages Board.
Section 27 of the Wages Boards Ordinance makes it incumbent upon every Wages Board to take into consideration the circumstances pertaining to particular branches of the trade or particular areas and determine different rates of wages, or make such provision for workers engaged in such trades. This provision casts a huge responsibility on the part of every Wages Board member to be conversant with the issues and challenges relating to that industry or trade at any given time. On the other hand, the Commissioner General of Labour, being the Chairman of every Wages Board, must ensure that every Wages Board is properly guided and members are furnished with sufficient information of the industry before determining minimum rates of wages for that industry. This is very clearly implied by the obligation cast under section 27 of the Wages Boards Ordinance.
One of the criticisms leveled against the current system is that some of the industries or trades do not have Wages Boards set up and therefore, such workers are at a disadvantage as they do not have any minimum wage fixation mechanism. Furthermore, it is also pointed out that the number of Wages Boards are far too excessive and this whole mechanism needs to be restructured in a more practical and an efficient manner.
In our view, the most serious concern in relation to the current minimum wage fixation mechanism is because there is no proper direction on the part of the presiding authority in terms of giving information to members and the members appointed to the Wages Board (especially the nominated members) who have virtually “veto powers” in terms of deciding on a minimum wage have no understanding whatsoever (in most cases) of the industry or the challenges facing the industry before determining a particular minimum wage for that industry.
In other words, it is our view that it is not the mechanism per se but the manner it is being implemented which is most objectionable at present.
General Wage Fixation in the Private Sector in Sri Lanka
Wages Boards in the private sector should generally be regulated by the supply and demand theory and is dependent on market rates and the capacity of each employer. The Wages Boards mechanism that is set up under the law also complements this fact as the Wages Board is mandated only to fix a minimum wage, over and above which employers and workers can bargain and agree on wages, depending on their capacities.
In the Sri Lankan context, it is extremely important to distinguish between the “wage” and “earnings” of an employee. This distinction needs to be very clearly highlighted in the context of wage fixation in Sri Lanka. Over and above the basic wage that an employer grants a worker, on which superannuation benefits are paid, there are many other forms of incentives/bonuses/allowances which are given to employees to enhance their performance/productivity. Therefore, the concept of a minimum wage in terms of the Wages Boards Ordinance cannot be considered in isolation. We need to consider other benefits, both monetary and non monetary that are granted to employees, which form part of the total earning package.
For example, in the apparel industry, in addition to the basic wage, there are many other incentives that are usually granted, such as attendance bonus, production bonus, transport, subsidized meals, etc. All these have to be taken into account in terms of ascertaining an employee’s “earnings”. Currently, the minimum wage of a designer in the apparel industry is Rs 10,530/- plus Rs 1,000/- (BRAWA) (US $ 89 approx). excluding the other allowances and bonuses. A machine operator in Grade 3 receives a minimum wage of Rs 9,075/- plus Rs 1,000/- (BRAWA) ( US $ 78) which, once again guarantees a minimum wage of over Rs 10,000/- per month.
 In addition, there are many other allowances, incentives and benefits granted to them.
The minimum wages in several Industries were increased through the respective Wages Board trades last year. In most cases, the increase was as much as 40%.
In the light of the above, what needs to be emphasized is that the stipulation of a minimum wage in respect of an industry should be done by taking into consideration the fact that employers necessarily need to grant additional benefits and payments over and above the wage to enhance efficiency and productivity. Therefore, fixing a high minimum wage will be counter productive to the entire industry.
In fact, legislation in several countries supports the view that only the basic wage is taken into account for the purpose of minimum wages. This is the case, for example, in Chile, Hungary and Malaysia[9].
International Trends in Minimum Wage Fixation
It is important for us to study systems of wage fixation in some of the other countries, although we concede that it is not possible to superimpose a particular model to suit our country’s requirements. However, one of the main drawbacks that exist in our system is the inflexibility of the definition of “wage”. Payments other than the wages, such as bonuses, allowances etc are not properly appreciated or recognized in fixing minimum wages.
On the other hand, in China, there is no separate minimum wage legislation. Gross wages have six components recognized by law. These include hourly wages, piece rate wages, bonuses, allowances, subsidies, overtime payments and the wage paid in particular cases. In addition, the law also recognizes that the determination and readjustment of the standards of minimum wages should be made with reference to labour productivity.[10] There are several minimum wage rates for different regions. In Beijing the minimum wage is 960 Yuan ( US $ 165) . In Shanghai, it is 1,120 Yuan and in Jiangxi between 500 to 700 Yuan.
In India the Minimum Wages Act provides for two alternative methods for fixing of wages at the central government or State levels. In accordance with the Minimum Wages Act, the appropriate government may set minimum wage rates for scheduled employments by appointing a committee to hold inquiries. The government must consult all relevant advisory committees before revising any minimum wage rate. Minimum wage rates can also be fixed for different skills and occupations.[11] The current national floor level minimum wage recommendation is Rs 100/- per day[12]. Data suggest that the minimum wage rates may be lower in some regions.
The minimum wage system in Pakistan is somewhat complicated although it has a National Minimum wage. The minimum wage for an unskilled worker in Pakistan is Rs 7000/- pm ( US $ 66).[13] But ,as the Punjab government web site states, Punjab state also fixes minimum wages that differ between Industries and Skills.
In Bangladesh the Labour Act of 2006 sets a procedure to fixing industry minimum wages. This statute stipulates that a Wages Board should take productivity into consideration in fixing minimum wages. The minimum wage in the ready made garment sector in Bangladesh is approximately US$ 67 per month. This wage is much less than the minimum wage in Sri Lanka applicable in the apparel industry which is approximately US$ 78 to 89 per month.
In the Philippines, regional tripartite wages and productivity boards determine the minimum wage rates applicable to agriculture and non agriculture employees in their respective regions[14]. Minimum wages are also fixed on a tripartite basis in Argentina, Thailand and Turkey[15]. Another striking feature in wage fixation in other countries is that a special procedure is adopted for wage fixation in the agricultural sector. For example, in the United Kingdom, a special procedure is adopted to fix minimum wages in the agricultural sector through the Agricultural Wages Board which is a tripartite body. However, only Scotland and Northern Ireland still have such a body as the Board for England and Wales was abolished in 2013.
On the contrary, there is no minimum labour statutory wage prescribed in Singapore. The National Wage Council guidelines are intended to be applied by all employers and employees as defined by the Employment Act. The NWC takes into account
a)      Growth in the national economy
b)      Movements in the total and basic wage rates
c)      Recent and anticipated national productivity levels.
There are special categories exempted from the NWC which are seamen, domestic workers or any person in managerial or executive grade.
In Malaysia, the National Wages Consultative Council Act of 2011 empowers the National Consultative Council to advise the government on all matters relating to minimum wages. The current minimum wage is RM 900 ( US $ 272). It is stated that this minimum wage which was stipulated in 2012 is only RM 100 more than the poverty line wage in Malaysia.[16]
In Vietnam, minimum wage rates vary according to the location and nature of the employer. An employer has the right to select the method of payment of wages calculated by reference to time (hours, days, weeks or months) or on the basis of a product produced or a completed piece of work, provided that the selected method is applied for a fixed period of time and the employee is notified of the method. In the case of State employees, the minimum wage is around VND 830,000 per month (approximately US$ 41),. In respect of employees in foreign owned companies/international organizations/foreign workers, it ranges between VND 1,100,000 to BND 1,550,000 per month (approximately US$ 55 to US$ 77).
Government intervention in private sector wages – Budgetary Relief Allowance of workers Act No.36 of 2005
The Employers’ Federation of Ceylon has consistently submitted to successive governments that uniform ad hoc wage increase should not be made to the private sector by the government. Such initiatives were taken by successive governments in the past and the last of it was through the Budgetary Relief Allowance of Workers Act No.36 of 2005.

We are pleased to note that ever since 2004 and the introduction of the government’s Ten Year Horizon Development Framework (Mahinda Chintana) of 2007 the government of Sri Lanka has made a conscious effort not to intervene in adjusting private sector wages. However, it is important to examine the consequences of such interventions. For purposes of brevity, we would wish to refer to the last piece of legislation, which is the BRAWA, which was introduced in 2005. Firstly, this piece of legislation could easily be regarded as having created the most amount of anomalies, confusion and dissention in the private sector. This legislation granted a special allowance of Rs 1,000/- to all those employees receiving a salary less than Rs 20,000/- on the condition of such an employee not having received a salary increase to that effect from October 2004 to August 2005. In other words, if an employee had already received an increase of Rs 1,000/- during this period, he or she was not entitled for it. The effect of this legislation brought about huge anomalies as employees who had been given merit increments for performance during that period were not entitled to this allowance, whereas an employee who had not received an increment or received something less than Rs 1,000/- on account of performance was brought up to the level of the employee who had already received an increment of Rs 1,000/- for good performance. This clearly demonstrates that this legislation destroyed the very essence of a performance management culture which is what needs to be introduced and developed in all Organizations, both private and public.
Secondly, even though this piece of legislation exempted employees covered and bound by Collective Agreements, there was an inherent inhibition on the part of many employers to enter into collective bargaining agreements in view of the risk of having any intervention of a wage increase in future. Here again, it shows that such intervention by the State in private sector wages creates a major obstacle for collective bargaining.
Studies done by International Organizations/Experts on setting up a Wage Policy in Sri Lanka
There have been numerous studies undertaken from time to time by international missions, including the ILO, with regard to formulating a wage policy for Sri Lanka. Some of the observations made in these studies need to be taken into account, whereas it is also submitted that certain proposals made in certain studies do not have any justification. There was a study done by an ILO mission carried out from 7th to 12 May 2007 which highlighted some important issues affecting wage fixation in Sri Lanka. Poor coverage of wage bargaining, missing link between wages and performance, need to limit the number of Wages Boards, linking wages to productivity are some of the issues that were highlighted, which need to be taken into account.
On the other hand, another study conducted by the ILO in 2008[17] caused concern to us in respect of some of the matters. This study appears to project the view that Sri Lanka has one of the lowest wages in the region and that the situation is “worrying”. We have mentioned above some of the minimum wages in the region from information given in the ILO reports.  Consequently, it is not justified to state that Sri Lankan wages ranks among the lowest in the region. The ILO studies also refer to a national minimum wage which has been rarely adopted in the countries highlighted above. It is our view that a national minimum wage could distort and create problems to certain sectors which need to be separately considered for fixing minimum wages[18].
1.      The National Pay Commission has been given a limited mandate as regards the private sector in terms of the gazette notification. In exercising this mandate, it is necessary to consult the stakeholders and their representatives before making any recommendations or proposals. This requirement is clearly in line with the ILO Convention on minimum wages[19].
2.      The Ten Year Horizon Development Framework (Mahinda Chintana) in its labour policy clearly articulates the need to enhance productivity. Employment generation is also recognized in this policy as one of the key policy directives. A counter productive wage policy or the fixing of a minimum wage can be detrimental to create employment opportunities. In other words, it could have a direct negative impact on employment.
3.      The Report of the Committee of Experts on the Application of Conventions and Recommendations of the International Labour Office, Geneva states that “neither the Convention No.131 nor the Recommendation No.135 contain provisions requiring member States either to establish a single minimum wage at national level or introduce a system based on sectoral minimum wages”.[20] Furthermore, Convention No.131 requires the effective fixing of minimum wages in the framework of a system characterized by its broad scope of application. For example, this Convention does not require the adoption of a national minimum wage, nor its determination by law[21].
4.      In the Sri Lankan context, it is extremely important to understand that employers in the private sector need to give something more than the wage in terms of incentives, bonuses, etc to ensure better efficiency and higher productivity. The most common example that can be given in this regard, which is peculiar to the Sri Lankan employment culture, are the incentive/bonus payments granted by certain employers with regard to attendance. Employees are granted payments in addition to the monthly wage simply to require them to be present at work regularly. Therefore, considering the minimum wage stipulated by law in relation to a particular Wages Board in isolation is not possible. We need to look at the total earning package of an employee in a given situation.
5.      The concept of a “living wage” and an “affordable wage” vis-à-vis the employer can be different, depending on the economic factors affecting the country. It is not reasonable to burden the employer with the responsibility of granting wages in line with cost of living increases.
6.      A comparison of minimum wages in the regions would not be prudent as the cost of living and the economic factors affecting each country would be different to each other. However, in the South Asian context it is clear that the Sri Lankan minimum wage in the apparel industry is higher than Bangladesh, Vietnam, and even in countries like India. Productivity is a concept that most countries have recognized in fixing legal minimum wages[22]
7.      The public sector wage fixing mechanism should be totally restructured and aligned to modern concepts of performance management. The inability to do so has been one of the major drawbacks for the public sector, as well as for the private sector, as it creates movement of highly skilled and competent professionals from the public to the private sector and also creates impractical expectations in the minds of lower categories of workers in the private sector.
8.      The government must never intervene in private sector wages. The Budgetary Relief Allowance of Workers Act No.36 of 2005 has created so many anomalies that are having negative effects on staff morale and performance even today.
9.      Sri Lanka needs a very broad framework on minimum wage fixation. This framework should be very simple and uncomplicated. Sri Lanka cannot afford a national minimum wage, especially in the context of having diversified sectors, such as the plantations, which contributes immensely to the economy in Sri Lanka. However, it requires a simpler model of a Wages Board mechanism with a robust system that would effectively guide the tripartite stakeholders in fixing minimum wages.
10.  Consequently, we need to look at a mechanism that would give a wider coverage and a simpler mechanism of minimum wage fixation.
EFC Proposal
The EFC submits that the Sri Lankan Private Sector needs a minimum wage fixation mechanism for lower categories of workers as envisaged under the Wages Boards Ordinance subject to a restructure of the composition of the Wages Boards. The Wages Boards trades need to be simplified and also widened in order to include almost all workers in industry excluding the white collar employees.
1.      Classification of Wages Board Trades.  We propose that the current structure of 44 Wages Boards trades be limited to the following classification :
a)      Wages Board for Services trade
b)      Wages Board for Manufacturing trade
c)      Wages Board for Plantation trade
d)      Wages Board for Hotel and Catering trade
e)      Wages Board for Wholesale and Retail trade
2.      Categories of Workers
Categorize the workers as factory/general workers – Grade 1 to 3 or classify them as unskilled, semi skilled or skilled.
What is important in the context of this proposal is that the Wages Boards should be constituted with proper representation from industry and workers. It is even more important that members nominated by the Hon. Minister of Labour and Labour Relations have a proper understanding of industry and the private sector in general. The Department of Labour must guide each Wages Board by furnishing information with regard to the different industries.
Finally, the submissions made above are not exhaustive. We would be glad to make further representations to the National Pay Commission whenever called upon to do so.
We believe that the National Pay Commission would take serious note of our submissions made above as we are a widely representative Organization of Employers representing many sectors and industries in Sri Lanka. We look forward to being consulted by the Commission in this regard. We thank you for the opportunity given  to us to make our submissions.
Ravi Peiris
Employers’ Federation of Ceylon
21st March 2014

[1] Paragraph A(iii) of Gazette Extraordinary No.1835/12 dated 05.11.2013.
[2] Business Today – June 2006.
[3] Para D of Gazette Extraordinary No 1835/12 of 5th November 2013
[4] Vide paragraph D of Gazette Extraordinary No.1835/12 of 5th November 2013.
[5] ibid Para K
[6] Chapter 11 of Mahinda Chintana
[7] General Survey of the Reports on Minimum Wage Fixing Convention, Report III (Part 1B paragraph 66)
[8] Article 4.1
[9] ILO: General Survey of the Reports on the Minimum Wage Fixing Convention.
[10] Labour Law Section 49
[11] Sec 3 (3) of the Indian Minimum Wages Act 1943
[12] Ministry of Labour Annual Report 2010-2011, Ch. 5 – Wages, 45 – 48.
[13] Labour Policy 2010
[14] ILO: General Survey of the Reports on the Minimum Wage Fixing Convention
[15] Ibid.
[16] Minimum Wages in Malaysia: People’s Perspective – Kaviyarasu Elangkovan
[17] Daniel Vaughan - Whitehead
[18] For example, the Plantation sector
[19] ILO convention No.131
[20] Paragraph 197 of the Report (2013)
[21] Ibid, paragraph 388
[22] Bangladesh, China, Philippines
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Last Updated on Thursday, 27 March 2014 15:39