Garment sector in wage wars

Garment factories say they cannot meet the latest Wages Board salary increase for garment workers while trade unions argue that the Board’s recommendations are inadequate given the increasing cost of living and are threatening ‘action’ unless a bigger wage hike is assured.

Last week the Wages Boards for the Garment Manufacturing Trade announced an increase of minimum wages for garment workers. Under this wage structure, most grades of garment workers will see basic salaries go above Rs 5,000. Garment factories that account for around 300,000 jobs in the country, say this wage increase is both unfair and unrealistic.

“The garment sector was not properly represented in the Wages Board when this decision was made. For years the Apparel Exporters Association had a slot in the Wages Board, because representation from an association is more representative of an industry than individual corporate representation. But this time, we were not given representation in the Wages Board. But since there was representation from garment companies we felt it was acceptable. But even these company representatives were not there during this salary increase,” said Chairman of the Sri Lanka Apparel Exporter’s Association (SLEA), Noel Priyatilake.

Garment factories also say the increase in minimum salaries is not necessary because garment factories already pay employees over Rs 5,000 per month. “In our industry the salary has two components. A Fixed component made up of the minimum wage and a variable component that is made up of a range of incentives like attendant bonus, meals, transport and so on. Very often the variable component is as high, or higher, than the fixed component. So when you add these benefits, factories spend a minimum of Rs 11,000 on each worker.

The take home pay packet by workers is also well above Rs 5,000,” said Priyatilake. Garment factories say they have already increased worker salaries under Board of Investment (BOI) recommendations this year. A further increase, say the factories, would be unbearable as the industry is already under pressure to reduce prices.

“This will hasten the demise of the garment industry. We can’t afford to pay salaries in this scale and also remain competitive. Because if we increase the basic wage it will have added repercussions by increasing EPF, over time, gratuity and so on. So the actual cost increase that factories will have to bear is going to be a lot higher than the minimum wage increase” said Priyatilake.
The factories say the current wage structure should remain unchanged, to strike a balance between production costs and productivity.

“For our industry the best way is the 2 tier salary structure because the variable component, made up of incentives, helps to motivate workers and increase productivity,” said Priyatilake. Garment factories are now lodging formal objections against the Wages Board recommendations. Trade unions however, say the salary increase is an urgent need given the rate of inflation.

“We asked the government for an immediate Rs 2,500 salary increase for private sector workers by taking in to account the cost of living in the country. Already a worker in the public sector gets a minimum salary of around Rs 11,000 per month. So how can a private sector worker live on less? But the decision was to increase basic salaries to around Rs 5,000 and to give a 25% salary increase. Now the employers are objecting to this,” said the Joint Secretary of the Free Trade Zone and General Services Employees Union, Anton Marcus.

Legal action
Trade unions are asking the government to pass laws for a mandatory salary increase of Rs 2,500 per month, for people working in the private sector. “Since employers are objecting to the current proposal, we are asking the government to pass legislation to increase salaries by Rs 2,500. This would ensure a salary increase for both the informal as well as formal sector workers. There are 6 million people working in the formal private sector but the number of people working in the informal sector, like unregistered factories inside houses, is increasing rapidly. The only way to make sure they are all given some fair treatment is to bring a salary increase through legislation,” said Marcus.

Unions are also considering national protest action unless wage increases come by soon. “The trade unions are meeting next week to decide on a course of action. Earlier we considered a national day of protest but did not set a date, because we wanted to see if this could be resolved. But now we may have to resort to some form of trade union action at a national scale,” said Marcus.