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Last update: April 2008

 

Sri Lanka

Employment Law 

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Employment Regulations

Sri Lanka's labour force is literate and educated, although weak in certain technical skills. The average worker has eight years of schooling. Two-thirds of the labour force is male and one-third is female. The unemployment rate is approximately 12%, with an estimated 720,000 of a total labour force of 6.2 million out of work (excluding North and East). Labour is available at a relatively low cost, though it is priced higher than in other South Asian countries. Child labour is prohibited and is virtually non-existent in the organised sector.

Most permanent full-time workers are covered by laws pertaining to minimum hours of work, minimum wage, the right of association, and safety and health standards. In addition, a Termination of Employment Act makes it almost impossible to fire or lay off workers who have been employed more than six months for any reason other than serious, well documented disciplinary problems. Disputes over dismissals can be brought to a labour tribunal administered by the Ministry of Justice. Collective bargaining is not yet very popular. However, over 400 companies (including a number of foreign-owned firms) belonging to the Employers' Federation of Ceylon (EFC) rely on the EFC to conduct negotiations on their behalf as and when required. 35% of labour in the industry and service sector is unionised. Labour in Export Processing Zones tends to be represented by non-union worker councils. In the plantation sector union participation rates are as high as 75%, though unionisation levels are reportedly on the decline. Also, many public sector entities have large and vocal unions, which often stage protests and "industrial actions". In general, labour unions are quite activist, and strikes are not uncommon. Most of the major trade unions are affiliated to political parties, creating a highly politicised labour environment.

Source: European Commission - Asia Investment Facility

 

Work Permits

If you need to go to Sri Lanka whether for business or for personal reasons, you need a visa or a permit which you can obtain by applying to your nearest Sri Lankan Embassy or Consulates. A complete list of all the main offices is provided by the:

Sri Lanka's Department of Immigration and Emigration


You are granted of a thirty days Tourist visa at the time of entry the country, if you are a visitor of one of the follow countries (see link, please):

Thirty days Tourist visa - Countries' list


For further information contact:
Controller Immigration and Emigration
41, Ananda Rajakaruna Mw,
Colombo 10, Sri Lanka.
Phone: 0094-11-5333365/ 0094-11-5333162
e-Mail: coniande@sltnet.lk
Web site: www.immigration.gov.lk


For More Information Click Links Below

KPMG - Mobility information

Sri Lanka High Commission London

Other useful information, provided by the Sri Lanka's Board of Investment.

 

The Employment Market

In theory there is adequate availability of labour. In practice there are some localised shortages at points of heavy demand - this means the EPZs, particularly Katunayake EPZ close to Colombo International Airport. Many European operators also report a general shortage of managerial level personnel.

 

Engagement and Dismissal

Employing workers in Sri Lanka remains straight forward with the difficulty of hiring index at zero. Recent changes in the legislation governing overtime also provide Sri Lanka with a flexible and accommodative environment when it comes to rigidity of hours. Although it is easy to hire it is almost impossible to fire a worker. Sri Lanka remains at the bottom of the rankings in terms of difficulty of firing workers. The cost of firing is higher in only three countries compared to Sri Lanka, where it costs 178 weeks of wages (see data below). On top of the difficulty of firing, Sri Lanka's broader labor regulations are extremely complex and rigid. The country has more than 48 labor laws, many of which date to the 1970s-a period in which Sri Lanka had a closed and static economy.
62% of jobs in Sri Lanka remain in the informal sector.


Source:  Doing business in Sri Lanka 2007, World Bank's report.


EXPENSIVE TO FIRE WORKERS IN SRI LANKA


Cost to dismiss a redundant worker (weeks of wages)


Lowest                                   Highest


New Zealand 0                       Argentina 139
United States 0                       Mozambique 143 
Italy 2                                   Ghana 178
Romania 3                             Sri Lanka 178
Australia 4                             Zambia 178
Singapore 4                           Egypt 186
Georgia 4                              Sierra Leone 329
Jordan 4                                Zimbabwe 446 

 
Source: Doing Business database

Check for further information the link below:

TERMINATION OF EMPLOYMENT OF WORKMEN ACT, No. 12 OF 2003.

About the employment relationship in Sri Lanka read also:

ILO- Employment relationship in Sri Lanka

 

Employees' Rights and Remuneration

For a full report of the Sri Lanka's Board of investment, please click here

 

Working Hours

The normal period of work allowed is 45.5 hours per week in a factory and 45 hours in a shop or office, excluding one hour of rest per day. The leave entitlement for office employees is seven days of casual leave and 14 days of annual vacation. Factory employees are entitled to 14 days of annual leave. Medical leave up to a maximum of 21 days per year is usually allowed under collective agreements. Maternity leave is available for a period of 84 working days. Although the law requires 11/2 days break each week, most organisations work longer hours during the week days and give two full days' break on Saturday and Sunday. The full moon "Poya" day of each month, of religious significance to Buddhists, is a holiday in Sri Lanka. In addition there are many public holidays.

Source: European Commission - Asia Investment Facility

 

Pensions

Employees Trust Fund:

Employer to remit an amount equivalent to 3% of the total monthly earnings of the employee before the last working day of the succeeding month. There is no contribution from the employee. Receipts for payment of E.P.F. and E.T.F. should be kept in the premises of the enterprise.
Gratuity

An employee who has completed five years' service shall be paid a gratuity on cessation of his employment irrespective of whether he has retired or resigned or even if his services have been terminated by the employer. Such gratuity shall be computed at the rate of half a month's salary for every year of completed service based on the consolidated salary last drawn by the employee. Payment has to be made within 30 days of cessation of employment. Failure to do so will result in the payment of a surcharge ranging from 10% to 30%.

An enterprise employing fifteen or more workers is liable to pay such gratuity.

For more information view the BOI's Report, 18th paragraph, click here
View also http://www.epf.lk/ about the Employees' Provident Fund, established under the Act No. 15 of 1958, and currently the largest Social Security Scheme in Sri Lanka
 

Termination of Employment

The contract of employment between employer and employee specifies the terms such as remuneration, period of probation, leave, holidays, and the period of notice to be given by either party prior to termination of employment. Satisfactory standards must be maintained at all work places with respect to ventilation, lighting, welfare amenities and health and safety. Termination of employment is widely regarded as a problem by employers (foreign or Sir Lankan). The labour laws were largely written during Sir Lanka's socialist years, and favour the employee. Dismissal for reasons of poor performance is hard to achieve, in practice. Dismissal for consistent absenteeism, or for gross misconduct such as theft, is possible but can involve a lengthy process through the labour courts. In either case it may be expedient for the company to negotiate a financial deal with the employee and pay them to leave. In companies with over 15 employees, an employee who is in employment for more than five years continuously is entitled to a gratuity payment which amounts to half a month's salary for each year of service. This is payable upon leaving for whatever reason.

Source: European Commission - Asia Investment Facility

 

Wages and Benefits

Please visit the web site below:

ILO - Labour issues in the textile and clothing Industry

 

Employment of Foreigners

About this issue see:

KPMG - Mobility Information

For more information about employment law in Sri Lanka, view:

Employing workers in Sri Lanka

Source: European Commission - Asia Investment Facility

 

Please note that this information was last updated in April 2008. The Information shown is for guideline purposes.  For precise and up-to-date information please contact the IPTU team or visit the country government website. 

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