Jobs freeze at apparel factories
Apparel factories have frozen new recruitments while small and medium organisations (SMEs) are struggling to stay afloat and larger corporates claim they have lesser orders despite exports doing well last month as well.
Across factories the workforce is cut down as unions say in some places they are asked not to report to work; plans are underway to cut jobs of workers with less than six months; employees are paid only the basic salary with no extras like transport and food; manpower agency workers arriving at the gates of the BOI zones are not been called for work.
Past President of the Apparel Exporter Association Felix Fernando said the next four to six months are likely to spell concern for the industry.
“Our gut feeling is that in the next four to six months orders will be down by 20-25 per cent,” he said.
He pointed out that imposition of the new taxes could have a further impact on SMEs even when the revenue comes in.
“This is the worse situation after 2008,” Sri Lanka Chamber of Garment Exporters Secretary General Hemantha Perera told the Business Times indicating that they have lost more than 50 per cent of orders. A majority of the SMEs are depending on 70 per cent of their business from sub contracts from larger companies and the balance from direct orders.
The biggest problem is that SMEs are currently facing a capacity crunch while some factories have no option but to close down, he said.
At the moment of the 85 companies registered with association nearly 35 are in trouble leaving nearly 10,000 workers with the threat of losing their jobs. Most companies have already announced no more new recruits since last month.
Mr. Perera noted that this situation of low orders is likely to continue throughout next year since the purchases made in spring and summer are still available due to the drop in retail demand in the European, UK and US markets.
Moreover, workers who used to get production incentives, night allowance and other extra payments are now down to surviving on their basic salary, he said adding that in this scenario some workers have already started to move out. Mr. Perera also noted that the current finance costs have also impacted the SME sector as a majority is operating on borrowed working and fixed capital. The interest cost for foreign currency that was earlier at 5-6 per cent has today increased to 13-15 per cent. Rupee borrowings previously less than 10 per cent are currently 28-35 per cent.
Apparel trade union leader Anton Marcus said they expect a series of labour reforms that unions are worried about would
see an increase in the number of hours of overtime per month
from 60-75 hours; and night work for women to be increased from 10-15 days.
This would prevent more workers being hired by companies and as a result there will be maximum exploitation of the workforce.
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