Biggest labour reform in decades, aims to modernise economy
The government is undertaking an ambitious overhaul of labour laws this year, with the objective of modernising, encouraging investment, and enhancing productivity.
Key reforms in 2026 include introducing four new, consolidated labour acts replacing 14 existing statutes focusing on trade unions, occupational safety and health and manpower/termination of employment, a senior official of the Labour Ministry told the Sunday Times Business.
The changes are intended to streamline the nation’s outdated labour laws, enhance the coveted “Ease of Doing Business” ranking to attract foreign investors, and meet international best practice.
The review under consideration under the International Monetary Fund’s Extended Fund Facility for Sri Lanka this year includes consolidating the economy’s recovery, which comprise structural reforms to the country’s labour laws for greater market flexibility and higher productivity.
The National Minimum Monthly Wage has been increased to Rs. 30,000 from Rs. 27,000 per month in January while daily wage has risen to Rs. 1,200 from Rs 1,080.
The legal restriction on night work for women has been relaxed to encourage female participation, with mandatory provisions for safe transport/accommodation. It has been proposed flexible working and overtime suggesting 16-hour shifts (inclusive of breaks) and making voluntary overtime compulsory in certain scenarios, he disclosed.
New regulations may require unions to have at least 100 members to be recognised and mandate secret ballots for industrial action, potentially reducing union power.
The Labour Department is upgrading its database to ensure all workers are registered in a national, centralised, and digital system.
Manpower agencies and contract labour are gaining legal status to enhance labour flexibility in accordance with contract labour legalisation, the official said.
However the government’s proposals have met resistance from trade unions. As a result a committee has been appointed to review and reconsider the previously drafted amendments, which were widely seen as employer-friendly. The committee has stated that its objective is to prepare a set of draft laws.
In this context the Free Trade Zone Workers’ Collective is expected to submit a series of proposals to the Ministry of Labour, highlighting the urgent need for a worker-centred legal framework in the wake of the present government’s move to introduce four new acts.
The collective stated that the new law has to focus on strengthening existing worker protections, ensuring freedom of association and the right to organise, addressing gender and racial inequalities.
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