Financial Times

Terminations, VRS and workforce restructuring on the rise

By Dilshani Samaraweera

Sri Lankan companies are adopting a range of ‘manpower restructuring’ methods this year to adjust to global recession impacts. This includes outright termination of workers and voluntary retirement schemes (VRS), and the use of less drastic methods, like temporary lay offs, wages freezes and recruitment freezes.

A survey conducted by the Employers’ Federation of Ceylon (EFC) in March – June of this year, targeting 135 EFC member companies, identified the various mechanisms used by companies. “Overall, we find that most companies prefer to retain workers, because large shedding can make a company leaner but not necessarily healthier,” said the Director General of the EFC, Ravi Peiris, presenting the survey findings at a workshop last week. .

Many companies have opted to control operating costs by stopping new recruitment (60%) and a few ( 15.5%) have stopped wage increases in 2009.

Only five companies out of the EFC membership have applied to the Labour Department in 2009 so far, to terminate workers. However, companies are now looking into temporary worker lay offs as an alternative to termination. Already four companies, out of the EFC survey, have opted for temporary lay offs.

Two factories have got worker agreement to stop work during some days of the week, but are paying workers their full basic salaries. The third factory has opted for a combination of a VRS and temporary lay offs, while the fourth, has applied for temporary lay off at half pay.

When it comes to terminations, the use of VRS is more popular than the termination process through the Labour Department. The use of VRS by managerial level personnel also increased in 2009. Some companies even offered better golden handshakes than the national compensation formula.
“This could be because a VRS is seen as faster, and therefore, a more cost effective option than going through the termination process,” said Mr Peiris.

However, for the rest of the year, most companies are not offering VRS (51.3%) and most companies (57%) are not opting to terminate workers.

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