Financial Times

Compensation formula under fire
Confusing positions from JVP, safety net may be abandoned
By Lenin Amarawickrama
A compensation formula under recent amendments to the Termination of Employment of Workmen Act for employees who lose their jobs has run into a fresh controversy while the close-to-being implemented proposal for a safety net for discontinued workers has got lost in the shuffle and appears to have been abandoned.

Trade union sources said that while the main JVP union was leading the fight for a new compensation formula, other JVP leaders are publicly known to have said that the formula mechanism should be scrapped and the status quo restored where compensation is negotiated between the employer and employee.

"There is absolute confusion in the JVP stand now," another union leader said, citing the two positions of one of the main partners of the United People's Freedom Alliance (UPFA) government.

In the meantime, the former UNP government's proposal to use three billion rupees from dormant accounts in the Employees Provident Fund (EPF) to set up a special fund for the provision of a dole and safety net for dismissed workers hasn't entered the latest debate over the amendments. Labour Department officials said there has been no discussion as yet with relevant authorities including the Treasury over this proposal.

Earlier trade unions had been opposed to the use of funds in dormant EPF accounts saying these accounts could be activated at any time. They were of the view that funding for such a scheme should come from the employers. Opposition to the scheme had however eased after the Treasury agreed to offer a 100 percent guarantee for the payment of unexpected claims after using such EPF funds. The Special Fund was to be used to pay a dole to a retrenched worker until new employment was found.

This provision was proposed by the former UNP government along with the compensation formula. However when the Act was amended, only the issue on the compensation formula was dealt with. Trade union and Employers' Federation officials said many cases have been handled under the new compensation formula which came into effect through a gazette notification on December 31, 2003.

According to this formula, a person losing his job is entitled to 50 percent of his salary over a 6-month period to be paid over 12 months. Siripala Amarasinghe, the JVP trade union leader who is also a parliamentarian, says his party wants this formula replaced by a new one in which 50 percent of the salary over a 9-month period is paid over18 months.

The proposed "safety net" officially termed the Unemployment Beneficial Insurance Scheme was intended to help employees who lose their jobs, with more training and enhancement of skills making them more suitable for other employment. However this facility was to be given only to workers who were discontinued within four years of their employment period.

Labour Department officials said these issues have been taken up at recent monthly meetings of the National Labour Advisory Council but no agreement reached on the new JVP proposals. Anton Marcus, leader of the Free Trade Zone Workers Union, said some unions were in favour of going back to the negotiated settlement process between the employee and the employer under the mediation of the Commissioner General of Labour, a regulation that was in force prior to January 2003. Ravi Peiris of the Employer's Federation said the Federation had agreed to the compensation formula now in force but was not in favour of the safety net cum dole process.

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