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EFC
cries foul over 'penal' compensation formula The new formula was published by the Commissioner of Labour in consultation with the Minister of Labour Relations and Foreign Employment in Gazette Extraordinary No.1384/07 dated March 15, 2005. The EFC has expressed their disappointment that no consideration has been given to the fundamental issues raised by them in the revised compensation formula. Eight submissions have been made by the EFC to the Minister since the day he took office, the first submission in May 2004 and the last in March 2005. "The issues raised were not merely in the interests of employers but in the overall interest of investment, job creation, enterprise competitiveness and moreover national competitiveness in the current global economic environment," said Gotabaya Dasanayaka, Director General of the EFC, in a letter to the Minister of Labour Relations and Foreign Employment, Athauda Seneviratne. "We also believe that these aspects were the principal objectives in bringing about amendments to the Termination of Employment Act but they appear to have been overlooked and negated in the outcome as it is now. In fact, the position of many employers and prospective investors has become even more challenging and difficult than before," he added. The EFC has also noted with concern that even the compensation formula that was tabled before the National Labour Advisory Council (NLAC) on October 12, 2004 based on which the EFC made their representations thereafter, has been further revised and the compensation payable by employers in terms of the newly gazetted formula is even higher than what was payable in terms of the formula tabled and discussed at the NLAC. One of the main issues being addressed is that the formula is excessive not only when compared with the formula that is currently gazetted but in relation to similar formulae internationally and particularly in the Asian region. The average retrenchment compensation for 20 years service in Sri Lanka is 39 months salary, whereas in other Asian countries it is 16.5 months salary, in Africa eight months salary and in Latin America 12 months salary. According to Dasanayaka, when compared with the formula that had been gazetted with effect from December 31, 2003, there is a 50 per cent or more increase in compensation in respect of certain groups. This compensation is not in relation to unjustified terminations and generally relates to situations where employers have to consider retrenchment for economic reasons and it is in that context that compensation needs to be considered under the TEWA. As it is, the compensation payable under this formula to certain employees exceeds what a court even in a situation of unjustified dismissal would consider. "In effect, it amounts to penal compensation," the EFC said. Another aspect that the EFC believes needs special consideration is that the formula does not take into account the affordability factor of an employer. The formula is to be applied to all non-disciplinary terminations of employment, which at present includes circumstances involving employee incompetence, employee ill health or injury due to factors unconnected with work and employees to whom alternate job offers are made by the employer. The EFC had stressed that it is extremely unfair by employers to be ordered to make any payment, let alone payment based on the fixed formula in such situations, where in fact, the employees should have no right to any form of compensation. The TEWA also stipulates no restrictions based on age and therefore, employees who are above 60 years of age are also covered by it. "It is extremely important that an upper age limit of 60 is fixed for the application of any formula, particularly in the context that there is no stipulated age of retirement for the private sector," said Dasanayaka in his letter. The EFC has urged the Minister to review the published formula and also adopt a more holistic approach to amend the laws relating to retrenchment. |
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