Employers caution Govt. over ad-hoc, arbitrary pay hike moves

Tuesday, 27 January 2015 00:42 - - {{hitsCtrl.values.hits}}

Insists Govt. should proactively support private sector to generate new jobs by ensuring an enabling environment for them to operate

The Employers Federation of Ceylon(EFC) has cautioned the new Government over the dangers of ad-hoc or arbitrary moves to hike pay in the private sector as well a proposal to introduce a new cost of living index value and making employees permanent. The concerns have been conveyed to President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe, Justice and Labour Relations Minister WijeyadasaRajapakshe, Finance Minister Ravi Karunanayake, Deputy Minister of Policy Planning and Economic Affairs Harsha de Silva and Treasury Secretary. EFC representation was in response to request made by the Inter Companies Employee Union to President Sirisena and comes hot on the heels of new Government’s promise of a pay hike for public sector employees. Employers had urged the Government to appreciate that private sector employees’ wage increases must necessarily depend on the nature of the industry, the capacity of the employer, market conditions and performance of the employee. “It is extremely important to place on record that whenever the Government has directly intervened in granting ad hoc wage increases to the private sector, the implications of it have been disastrous,” the EFC said. It also said the request made by the Inter Company Employees Union to grant an ad hoc increase to all employees in the private sector is totally contradictory to the concept of collective bargaining, as employers who engage in such bargaining will find themselves in a dilemma, if the government grants across the board increases over and above what has been agreed to by Trade Unions and Employers through a Collective Bargaining Agreement. “It is also necessary to appreciate that the capacities of private sector employers differ from one to another. Therefore, a uniform wage increase being imposed on them can be totally counterproductive and may even lead to the closure of some of the businesses,” EFC has warned. See full text of EFC Commenting on the other proposal, EFC said most private sector employers have moved away from linking wages to a cost of living index. “Such a wage mechanism is archaic and exerts tremendous pressure on employers. Therefore, this request is irrelevant in the context,” EFC added. Following is the full text of the letter written by EFC Director General Ravi Peiris. We write with reference to the letter dated 19January 2015 sent by the President of the Inter Company Employees Union to Your Excellency under the title ‘Request made by Inter Companies Employees Union in respect of private sector employees’.The contents of the letter contains a request to grant a salary increase to the private sector employees in line with whatever is granted to the public sector. In addition, there is also reference to “cost of living index” value to be “gazetted” and introduction of laws with regard to making employees “permanent” in service. As you know the Employers’ Federation of Ceylon (EFC) is the only employer organisation that directly represents employers in relation to employment and labour related matters. In this context, we consider it our duty to make the following observations with regard to the request made by the Inter Company Employees Union, so that you will be better able to understand the far reaching adverse implications of acceding to this request. 1. Request for a wage increase for private sector employees We are confident that you are aware that the wage mechanism structures of the public and the private sectors are totally different. Quite apart from that, it is important to appreciate that private sector employees’ wage increases must necessarily depend on the nature of the industry, the capacity of the employer, market conditionsand performance of the employee. It is extremely important to place on record that whenever the Government has directly intervened in granting ad hoc wage increases to the private sector, the implications of it have been disastrous. The last such interventions was when the government introduced the Budgetary Relief Allowance of Workers Act No.36 of 2005 which created much confusion and anomalies within private sector enterprises.Even after almost 10 years, there are still disputes and issues in relation to the implications of the wage revision granted under this law. Another important factor that needs to be highlighted is that we have a formidable piece of legislation that regulates private sector wage fixation. The Wages Boards Ordinance empowers Wages Boards trades to fix minimum wages in respect of various industries and these Wages Boards sit from time to time and revise minimum wages. During the recent past, there have been revisions every year, the last of which was in 2014. Over and above these mechanisms, private sector employers have their own ways in which they revise wages. There are still quite a number of employers who engage in collective bargaining with Trade Unions and have Collective Agreements. In fact, the Inter Company Employees Union is one such Union which engages in collective bargaining with us on behalf of companies. The request made by the Inter Company Employees Union to grant an ad hoc increase to all employees in the private sector is totally contradictory to the concept of collective bargaining, as employers who engage in such bargaining will find themselves in a dilemma, if the government grants across the board increases over and above what has been agreed to by Trade Unions and Employers through a Collective Bargaining Agreement. Quite apart from this, special mention needs to be made about the Plantation sector which covers more than 200,000 workers in 23 Regional Plantations Companies. This is the only sector which has an industry based Collective Bargaining Collective Agreement currently operative. In terms of production costs, the wage component is almost 70%, which is extremely high and in fact, the highest among other competing countries. In the circumstances, stipulating a mandatory wage increase to this sector without appreciating its capacity to pay will undoubtedly be destructive to this valuable industry which has been the life blood of our economy for many years. It is also necessary to appreciate that the capacities of private sector employers differ from one to another. Therefore, a uniform wage increase being imposed on them can be totally counterproductive and may even lead to the closure of some of the businesses. Quite a number of employers have already granted wage increases at the beginning of this year according to their practice. At a time when Sri Lanka is embarking on a journey of good governance under your leadership, it is important that decisions are made with regard to same in a prudent and cautious manner ensuring that it will not result in adverse consequences, even though it may be notbe the most popular amongst the majority. Over the years, we have seen that short term populist decisions have long term adverse consequences. 2. Cost of living index In this regard, what needs to be stated is that most private sector employers have moved away from linking wages to a cost of living index. Such a wage mechanism is archaic and exerts tremendous pressure on employers. Therefore, this request is irrelevant in the context. 3. Introduction of laws relating to permanent employment We are confident that you will agree that Sri Lanka has one of the most stringent labour law regimes in the world. The Termination of Employment of Workmen (Special Provisions) Act No.45 of 1971 already makes provision for coverage of employees who have worked for more than 180 days during a period of 12 months. Therefore, we see no reason as to why additional laws should be enacted in this regard. In the overall context, the Government should proactively support the private sector to generate and create employment by ensuring an enabling environment for them to operate. This does not mean a ‘hire and fire’ regime. It means an environment that is suitable and will respond to the business needs of today. The world of work is changing at a rapid pace. We need to change accordingly. We cannot make the same demands that we have been making for the last 50 years. We need to have a change of attitude. Lastly, on behalf of the EFC we wish to convey our heartiest congratulations on your election as the Executive President of Sri Lanka. We are confident that you will take serious note of what has been explained above and do nothing that would jeopardise the interests of the private sector in our country.

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