Industrial Relations Forum

Q: I am planning to open a small factory to make Rubber Toys next month. What are the welfare facilities I should provide to workers under Labour Law?

A: As the employer you are required to provide and maintain following facilities for the welfare of all persons employed in the factory under the Factories Ordinance.

a. Supply of drinking water
b. Washing facilities
c. Suitable storage for clothing not worn during working hours.
d. Facilities for resting for female workers whose work is done standing
e. A meal room
f. A First aid box containing the appliances and requisites as stipulated in Factories (First aid) Regulations of 1980 and a leaflet on First Aid.

Q: I have a small workshop in Colombo and employ 5 persons. I started 3 years ago and two of the employees have been with me from the inception. Now I want to start contributing to EPF and ETF for my staff even though the staff has not made any request. However I can not pay any arrears because I simply do not have the cash to do so.

a) How could I set about paying the EPF/ETF for the future? What are the formalities I have to fulfil?

b) Do I have to give appointment letters to the employees?

c) If I have to give what should be the date of commencement of employment?

d) If I do not give appointment letters how could I establish the salary for EPF in case of any future dispute?

e) Do I have any concessions in the law as a small business?

A: a) Payment of EPF/ETF can be commenced after registering your establishments in the Dept. of Labour using the prescribed forms. The forms are available at the Dept. of Labour. However, if any employee established that he was employed 3 years ago, you are liable to make a contribution, and EPF from that date with surcharge going up to 50%.

b) Under our Labour Law there is no legal requirement to issue letters of appointment to employees (except for the employees covered by the Shop And Office Employees Act).

c) Does not arise

d) Payment of salary to each employee can be established by providing pay slips or pay sheets.

e) In the case of EPF no exemptions are provided for small establishments. However, establishments having less than 15 employees are exempted from the payment of gratuity by the Act. Similarly the Termination of Employment Act of 1971 and Workman's Compensation Ordinance are not applicable to establishments having less than 15 workers.

Q: In your last column, you had mentioned that, when an employee is continuously sick his service can be terminated by applying to the Commissioner of Labour for a non-disciplinary termination. Can you please explain what this "non-disciplinary termination" is?

A: Under the provision of the Termination of Employment Act of 1971, an employer cannot terminate services of an employee except for misconduct. Accordingly he has no right to terminate an employee on non-disciplinary grounds if the employee has completed one year service and has worked for 180 days. This non-disciplinary termination includes following.

a) Retrenchment or lay off due to closure of business.
b) For absence due to sickness covered by a medical certificate.
c) Termination under the provisions of a contract of employment of a permanent nature, which is not a way of punishment (i.e. The provision made in the contract that it can be termination with one month's notice )
d) Termination on ground of incompetence or inefficiency which cannot be considered as misconduct.
e) Termination on the grounds of absence due to police arrest or detention.

Q: As you know, most of our Banks, Tourist Hotels and Mercantile Establishments employ women cadre in duty after even 10 p.m. in the night. But Labour regulations in the island do not permit, women to be employed even on shift duty base after 10 p.m. Actually the normal working time should stop at 6 p.m. What is the true legal position or exception in this regard? Please advice.

A: a) Female employees in Banks and Mercantile establishments can be employed till 8.00 P.M

b) Female employees in Tourist Hotels with residential facilities can be employed till 10.00 P.M

c) Female employees in Airline as a hostess or in a residential hotel as a receptionist or Ladies cloak room attendant, linen room attendant or Lavatory attendant can be employed throughout the night.

Q: An employee of our Company was dismissed for Misconduct after 4 1/2 years service. He has made a complaint to the Labour dept-claiming gratuity. The Labour department has fixed an Inquiry on his complaint and summoned us for the inquiry. Are we liable to pay a gratuity to this employee?

A: When a complaint is received from any employee, the Labour department will take action to call all parties for a discussion for the purpose finding an amicable settlement for the dispute. However in your case, the company has no liability to pay gratuity to the employee, as he has not completed 5 years service. The Labour department has no authority to direct you to pay any gratuity to him. If the employee makes a complaint before a Labour Tribunal, Tribunal may order payment of a reasonable amount as gratuity as it has powers to make any just and equitable order.

Q: Can we take disciplinary action against an employee for "slowing down" the production?

A: Concerted slowing down of production is Misconduct justifying dismissal as decided by the Supreme Court in the case of Hayley's vs. De Silva (64 NLR 130)

Q: We are using "Contract Labour" to do certain work in our company. These workers are supplied by a Labour Contractor. We understand that this Labour contractor is not making any contributions to the EPF on behalf of them. Is there any liability on us to ensure contributions to EPF for them?

A: Under the EPF act workers classified as the "Contract Labour" are also entitled for EPF benefits and the employer is responsible for making contributions of EPF on their behalf. In your case, the employer of the Contract Labour in the Labour contractor who should make contribution to EPF. If he fails to make such contribution, the Labour department will prosecute him before the Courts and if it is declared that contributions cannot be recovered from him, the Employer who engaged Contract Labour is liable to make such payments to EPF.

Q: If an employee is paid a monthly salary of Rs.3000 and if he works on a Poya day what will be his overtime rates for 8 hours and over. Please explain under wages board ordinance (Rubber Manufacturing) and Shop and Office Employees Act.

A: For both Shop/Office employees and employees in Rubber Manufacturing trade the rate of payment for working on a Poya day in 1 1/2 times only for irrespective number of hours worked (Eg: Rs. 3000/240 x150/100). The employee is not entitled for any other benefits such as Lieu leave.

Due to the confidantial nature of the querises sent us we do not publish the names & addresses of the senders. And also we do not repy any letters by post individualy.

Please do not hesitate to write in to us about any problems you may come accross regarding employment. Our expert on employment matters may advise you on any such matters. Our address is

"Industrial Relations Forum", C/O Sunday Times, No 47 , W.A.D. Ramanayake Mw. Colombo.12 Fax no.448323,423921. E.mail. Wnglgen@wijeya.lk

Business Diary

CCC seminar

July 20: The Ceylon Chamber of Commerce in association with the World Intellectual Property Organisation (WIPO) holds a seminar on the Role of Industrial Property in Enhancing Competitiveness of Enterprises at the Ceylon Chamber of Commerce.

Resource Persons will be Johan Stonier. Licensing Consultant of Davies Collison Cave, Australia and Lee Yuke Chin, General Manager, Infomation Services, Standards and Industrial Research Institute of Malaysia.

The programme will cover the effective use of trade marks in the marketing of goods and services, patenting and using patent information in maintaining competitveness, the fundamentals of licensing and transfer of technology, valuation of industrial property assets of an enterprise, and developing industrial property strategy for enterprises in Sri Lanka.

Accountability

July 22:Emerging need for Marketing Accountability will be held from 5.30 to 7.00 p.m. at the Earl's Court Trans Asia Hotel.

This topic was selected as being extremely relevant today since many companies are re-writing their business rules. Shareholders are alert on how their monies are spent and Information Technology has revolutionized the way in which business is conducted.

The guest speaker is Hilmy Cader, Managing Director of Marketing Technologies International. Mr. Cader is a Fellow, Graduate and Member of the Chartered Institute of Marketing (UK). He counts over eighteen years as a marketing practitioner with seven years in international marketing as Area Director-South Asia and Middle East for Ralston Purina of USA and Regional Marketing Manager, Middle East, for the New Zealand Dairy Board.

BDM cricket shop opens in Dehiwala

Ralhum Sports Company Pvt. Ltd has been appointed the sole agents for BDM products in Sri Lanka by B.D. Mahajan & Sons Pvt. Ltd. of India.

The company has announced the launch of BDM cricket equipment in Sri Lanka, a company release says.Principals B.D. Mahajan & Sons Pvt. Ltd. are one of the largest manufacturers of cricket equipment in India and have been in this trade since 1925. All items are manufactured in- house in 3 modern factories enabling strict quality control and prompt delivery of items. Emphasis is also directed at new products and modifications thus making the research and development function very inportant for them.

Investment prospects

New look Caltex has three aims

Managing Director of Caltex Ceylon Limited and Lanka Lubricants Limited, Ronald C.Hopkins advised that the Colombo Stock Exchange had granted approval for an off-the-floor transaction that transfers the 51% Caltex interest in Lanka Lubricants Limited from Caltex Trading and Transport Corporation to Caltex Ceylon Limited.

This change does not involve a change in beneficial interest because after a recent reorganization, Caltex Ceylon Limited is itself a 100% subsidiary of Caltex Trading and Transport Corporation.

Caltex Ceylon Limited was incorporated in Sri Lanka in 1938. It is one of the oldest Caltex subsidiaries, and one of the very earliest companies registered under Sri Lanka's Companies Act.

It was the original marketing company for Caltex when Caltex was one of three major oil companies that operated in Sri Lanka until nationalization in the 1960's. Although the company's assets were nationalized, Caltex had chosen to maintain the company's registration over the last 25 years in the expectation that the market might one day be liberalized for reinvestment by majors.Mr. Hopkins said that this reorganization has several objectives: "First, it will e\pardThird by reactivating a company that has been in existence in Sri Lanka for over 60 years, it is felt that the move will symbolize the company's standing as an investor that is committed to the country over the long haul."

Tuticorin to expand port facilities

The Indian Government has accepted PSA Corporation's tender offer to operate and maintain the Tuticorin Container Terminal for a concession period of 30 years. G. Ramasubramaniam, Regional Manager, and Jules Yap, Deputy Regional Manager, International Business, report.

Tuticorin port, located at the South-Eastern tip of India in the state of Tamil Nadu, is one of the 11 major ports of India. In 1996/1997, the port handled some 10 million tons of cargo, including about 90,000 TEUs or 5% of total Indian container traffic.

For the year 1997/1998, the port expects to handle about 105,000 TEUs. The main attraction of Tuticorin is its geographical location which is close to the international shipping lane.

Presently, Tuticorin port handles a variety of cargoes such as coal, chemicals, oil, granite and timber. Due to congestion in the other major ports of India and Tuticorin's proximity to the Colombo hub, container volume at Tuticorin has been growing rapidly over the last few years. This trend is expected to continue.

Containers are now handled across conventional berths without the support of specialised container handling equipment.

Aware of the need to expand its container-handling capabilities, the India Port Trust began constructing dedicated container berths about two years ago.

The new container terminal, with a 370 metre quay length, will be capable of servicing two feeder vessels simultaneously. PSA Corporation will install new quay and yard cranes and undertake minor civil works at the new container terminal. Operations are expected to commence in 1999.

Besides PAS Corporation, the other consortium members in the joint venture for the operation and management contract for Tuticorin Container Terminal are South India Corporation (Agencies) Limited, a South Indian holding company under the MAC group of companies operating from Tamil Nadu, and Singapore's Nur Investments Pte Ltd. PSA associate company CWT Distributions. MAC and Nur are existing joint venture partners in distripark development and o\pardTuticorin has a rich history dating back to the days of the British Raj when it received the first Indian flagged vessel, a symbolism of the struggle for independence in a shipping business controlled by the British East India Company. It was also said that the first container box for India landed at Tuticorin.

Hongkong Bank builds cohesive image

An image advertising campaign of Hongkong Bank was launched in Sri Lanka on July 12 with the objectives of generating awareness for the bank in the Asia Pacific Region and building a cohesive brand image.

This campaign known as "I am free," is designed to highlight HongkongBank for its personal banking and its commitment to quality customer relationships. Its proposition is founded on the basic need in banking - security, i.e. peace of mind when you bank with HongkongBank.

This state of mind is supported by HSBC's international size, resources and performance. Hence 'with the world's largest financial organization behind you, a customer can feel free to do whatever he/ she wants in the future'.

The campaign will run in all three languages and will be on TV, press, radio and outdoor. The other countries in Asia where the campaign has been launched are Singapore, Thailand, Taiwan, Hong Kong, India and Philippines.

HongkonBank is a member of the HSBC Group. With its network of 5500 offices in over 79 countries and territories, the HSBC Group is one of the largest financial organizations in the world.

Thai comes on top again

Thai Airways International has been voted on top based on a recent IATA survey for its efficient services and high quality of catering. Thai has apparently moved up in the survey from third to top place, according to the survey of passenger on Europe-Asia routes (SPEAR) carried out by the International Air Transport Association (IATA) between October 1997 to March 1998 a company release says. The result was in comparison with the previous survey conducted six months ea\pardThe Airline also moved from third to second place for total services provided by the Airline and from fourth to third place for its cabin attendants' human relations and mannerisms.

SPEAR is carried out every six months between April - September and October - March and is designed as a means of comparing airlines operating on the Europe-Asia route by passengers on board.

The survey may be completed in two ways. By passengers at major airports in Europe who are randomly selected to fill out the opinion form which can then be posted or by passengers travelling on board various selected flights.

Standard Bank's treasurers poll

Standard Chartered Bank Colombo Treasury, recently conducted the third Treasurers' Poll for the half year ending June 1998. The poll which looked at certain key economic indicators was well received.

The respondents were asked to forecast their predictions on the Dollar Rupee Spot Rate, level of Depreciation, the one Year Treasury Bill Weighted Average Yield, Call Money Rate, Inflation and the All Share Price Index rate.

The intention was to feel the corporate pulse on their perceptions on the Sri Lankan economy. The Bank recently announced the winner who predicted the closest indicators to the actual data as at June 30, 1998.

Savings Investment Guide

The two groups of non–tangible investments

By Gam Blurrr

Our topic for this week is tangible and non-tangible investments, with special emphasis on the benefits of treasury bills. Once again, we have secured the services of AGM/Treasury DFCC Bank, Mangala Boyagoda to enlighten the readers.

Q: What are non-tangible investments?

A: Non-tangible assets are government treasury bills, government loans, government bonds, commercial paper, debentures, corporate bonds, shares and unit trust. We have mentioned earlier that tangible assets are land and building, gold, silver, plant and machinery, and vehicles

Q: Can it be categorised as government and corporate investments?

A: Yes. Non tangible assets can be categorised into two groups: government and corporate. Tenurewise, they are short, medium and long term.

Q: What are short-term government instruments?

A: Short-term government instruments are one year Treasury Bills (TBills). They are also called money market instruments, as its less than one year.

Q: Medium term government instruments….?

A: Government loans are known as medium term instruments, as they are issued for 1-5 year period.

Q: And long term…?

A: Government bonds are issued for a long term period, usually for a 5-40 year period.

Q: But in Sri Lanka bonds aren't bonds issued for a much shorter period?

A: Yes, as our bond market is in its infant stage. The government commenced issuing bonds last March, and the longest maturity period is up to four years.

Q: What about short term corporate instruments?

A: Corporate issues Commercial Paper (CP) as a short-term measure to raise funds. In Sri Lanka, CP is restricted up to 6 months.

Q: Medium term issues…?

A: Medium term issues are asset backed notes, corporate debentures and floating rate notes. They are issued for a 1-5 year period.

Q: Long term….?

A: Long term issues are corporate bonds, shares, which are issued for over 5 years.

Q: Why does the government issue TBills?

A: The government issues TBills to meet the budget deficit and fund much needed capital for development projects. At present, government has issued Rs. 115 bn worth of TBills to the market. The government also raises money through taxation and tariff, foreign borrowings. The balance is borrowed from public as Public Sector Borrowing Requirement (PSBR). All governments borrow from public, it's not something unique to our country.

Q: When the government borrows money, does it need to get permission from the parliament?

A: Treasury bills are short-term debt issued by governments for short-term borrowings. So the government must get sanctions from parliament to borrow money.

Q: How do you know how much the government wants to borrow?

A: The Central Bank raises money on behalf of the government. Every Monday, the Central Bank publishes a notice in the newspapers stating the amount of TBills its hoping to auction every week. The auctions are carried out on Wednesdays.

Q: What is the risk involved in buying a TBill?

A: Treasury bills are low risk instruments as the government is guaranteeing them. It is guilt edge security. Risk wise they are ranked higher than bank deposits. It has the highest liquidity, just like having cash in your hand at any given time, as there is an active secondary market for it. But you can make capital gains and losses from it as well.

Q: How does a TBill fare compared to bank fixed deposits?

A: Compared to bank fixed deposits, treasury bills are more liquid. A commercial bank would penalise you by about 3-4 per cent if you withdraw your money prematurely. But such a loss never exists in TBills.

Q: What are the present TBill rates?

A: At the recent TBill auction a 3 month bill fetched a 11.85 per cent interest, 6 month bill 12.01 per cent interest and a 12 month bill for 12.16 per cent interest.

Q: What is the minimum denomination of a TBill?

A: A minimum denomination of a bill is Rs. 10,000.

Q: How can an investor buy a TBill?

A: A TBill can be bought from primary dealers. As a step towards broadbasing the TBill market, the government has approved 18 primary dealers to trade TBills. The dealers include 11 commercial banks and 7 non-financial institutions.

Q: What is the role of the primary dealer?

A: The role of a dealer is to bid at the weekly auction on behalf of their clients. This is also called the primary market.

Some dealers run inventories, were you could buy the TBill at a higher rate at a later date.

Q: Should not the interest paid on TBills be lower than fixed deposits?

A: Yes. The world trend is that government bills should be at a higher rate than bank fixed deposits. TBills are low risk security wise, have high liquidity and high return than bank deposits. We discussed about the risk-reward structure previously, where we said that if an investment has a low risk it has a lower return, if it has a high risk, then the return should be high.

Q: Isn't there a reversal in the situation here?

A: Yes. In Sri Lanka the situation is the opposite. A low risk guilt edge security brings high return, whereas a high risk commercial bank gives a low return. It's a serious mismatch. The key to this mismatch is the lack of awareness and the ignorance of the savers. Our topic for next week would be on the present secondary treasury bill market. Readers are invited to send in their queries on issues raised above.

Return to the Bussiness Contents