The need to overhaul Sri Lanka’s labour laws to fully exploit the opportunities of growth and development has been emphasized by a majority of employers in a survey conducted by the Employers Federation of Ceylon (EFC) with the assistance of the International Labour Organisation (ILO).
Respondents, in the survey titled ‘Impact of Labour Laws on Employment Generation in Sri Lanka’, were of the view that labour laws are a constraint to employment generation, and needs an overhaul in line with changes taking place today.
“So it is paradoxical for such laws to remain on the statute books and for us to expect investment and employment generation," noted Ravi Peiris, Director General of the Employer's Federation of Ceylon (EFC), when he outlined the findings of the survey at a media conference held in Colombo on Tuesday.
He said that 91% of respondents in the survey emphasised that labour laws were a constraint on employment generation in Sri Lanka. This included 94% from the manufacturing sector, 97% from the services sector and 96% from the plantation sector.
"We always told the government that highly inflexible labour laws need to be replaced by a basic legal framework of labour protection with room for flexibility in contractual arrangements, workforce size, working times and functions," he said.
The report on findings of the survey will be presented to the government soon, he disclosed.
According to the survey, one crucial barrier for investment (both local and foreign) was the rigid labour market framework.
Mr. Peiris noted that the current labour regulatory framework consists of labour laws which have essentially existed prior to 1977, when the industry was heavily protected through stringent import substitution methods.
“The free market economy introduced after 1977 necessarily requires a national economy driven by massive private sector investment,” he added.
In one of the volumes of the International Labour Review published by the ILO, Geneva, an article entitled ‘Is Asia adopting flexicurity?’ featured six Asian countries, namely, China, Korea, Singapore, Malaysia, India and Sri Lanka. This article stated that these countries need to provide an adequate degree of labour flexibility to remain competitive.
In respect of India and Sri Lanka, the article stated that very few reforms to the labour laws have been introduced and these countries continue to rely on an older model of employment-based security.
The Sri Lankan labour law framework is a classic example of a country having an economy of a developing country attempting to implement social policies of a developed country, Mr Peiris said
“It is therefore time for the policy statements that are enshrined in the 10-Year Horizon Development Framework to also translate into our labour relations framework so that Sri Lanka could fully exploit the opportunities for growth and development,” he said.
“What is extremely important in a labour regulatory framework is to ensure that we strike the correct balance between efficiency and equity. One cannot be achieved without the other. If we only support one and ignore the other, we are bound to lose both” he added.
The survey was conducted, via a questionnaire sent to 525 members of EFC in March 2011 as well as a sample of 40 enterprises in the small business sector which are not members.
Some 50 to 80 % of respondents ranked the Termination of Employment of Workmen (Special Provisions) Act No. 45 of 1971, the Industrial Disputes Act, the Shop and Office Employees Act, Wages Board Ordinance and the Gratuity Act No. 12 of 1983, as having a negative impact on employment generation.
The findings also revealed that the inability to find skilled and qualified employees is also a significant reason for employers being unable to recruit new employees for new job positions.
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