LABOUR LAWS IN SRI LANKA
Legislation in Sri Lanka relating to Industrial, Employment and Labour relations can be divided into
seven categories as follows;
1. Laws on Social Security
i. Employees provident Fund Act
ii. Employees Provident Fund (Special Provisions) Act
iii. Employees Trust Fund Act
iv. Employees Trust Fund (Special Provisions) Act
v. Payment of Gratuity Act
2. Laws on Welfare and Well-being of Employees
i. Employment of Women, young Persons and Children Act
ii. Maternity Benefits Ordinance
iii. Employment of Females in Mines Act
3. Occupational safety and health and Workmen’s compensation
i. Factories Ordinance
ii. Workmen’s Compensation Ordinance
4. Laws relating to terms and conditions of Employment
i. Wages Board Ordinance
ii. Shop and Office employees’ (Regulation of Employment and Remuneration) Act
iii. Employment of Trainees (Private Sector) Act
5. Labour relations
i. Trade Union Ordinance
ii. Employees Councils Act
iii. Industrial Disputes Act
iv. Termination of Employment of Workers (Special Provisions) Act
6. Law relating to Plantations and Estate labour
i. Estate Labour (Indian) Ordinance
ii. Medical Wants Ordinance
iii. Indian Immigrant Labour Ordinance
iv. Minimum Wages (Indian Labour) Ordinance
v. Trade Union Representatives (Entry in Estates) Act
vi. Estate Quarters (Special Provisions) Act
vii. Allowances to Plantation Workers Act
viii. Services Contracts Ordinance
7. Foreign Employment
i. Sri Lanka Bureau of Foreign Employment Act
Laws relating to Social Security
Social Security of employees is addressed by three main mechanisms. They are the Employees’
Provident Fund, Employees’ Trust Fund and the Gratuity Fund. By them employees are granted
financial benefits upon completion of a statutory period of service, change of employment or reaching the retirement age.
Employees Provident Fund (EPF)
The EPF was established to provide for the payment of superannuation benefits to persons employed
in the private and corporate sectors, through a contributory mechanism. The objective of the Fund is to ensure that an employee receives a lump sum in his/ her old age whereby he/she and the family can
live in retirement without depending on the State or society.
All employees (other than government servants, local government service employees, domestic
servants, employees in charitable institutions or any institutions maintained solely for the purpose of
religious worship or social service and employees in industrial undertakings which are carried mainly for the purpose of giving industrial training to juvenile offenders, orphans or to persons who are destitute dumb or blind) are covered by the EPF Act. Now even employment in the service of any charitable Institution or Institution maintained for the purpose of religious worship or social service employing or more employees is also a covered employment. It includes apprentices and learners who are paid remuneration.
Employees Provident Fund was established by Act No. 15 of 1958. Since then there have been nine
Amending Acts on the subject. Employers have to remit every month to the Central Bank, an amount
equivalent to 20% of the employee’s total earnings to the Fund. The Employee’s contribution is 8% and the Employer has to contribute an amount equivalent to 12% of the employee’s total earnings.
Employees electing to pay higher contribution can do so but the decision, once taken, is irrevocable.
“Earnings” include wages, cost of living allowances and similar allowances, payment in respect of
holidays and leave, cash value of food provided by the employer and meal allowance but excludes
overtime payments. Payments for work done during normal working hours on weekly holidays, Poya
days or public holidays should also be considered as earnings for the computation of EPF contributions.
Remittance by the employer has to be done before the last day of succeeding month. Failure to remit
EPF results in surcharges ranging from 5% to 50%. (Surcharges : less than 10 days -5%, 10 – 01
month – 15 %, 01 M -03 M - 20%, 03M -06M - 30%, 06 M -12 M – 40%, Over 12 months 50%)
When can an employee claim EPF benefits?
Under Part III of the Act, Section 23, a member can claim EPF benefits:
o Upon reaching the age of 55 years (man) and 50 years (woman).
o Women can also claim upon ceasing to be unemployed after marriage.
o Due to permanent and total incapacity for work and being certified by a registered
medical practitioner
o On emigrating from Sri Lanka
o Upon taking up pensionable employment in the public service, local government, in
district service, or in the service of any local authority other than local government
service.
Under the Amendment Act No. 14 of 1972, an employee in a public corporation or government owned business undertaking can withdraw the total amount lying to his/ her credit upon being retrenched from service. Under Section 30 every claim for benefits by a member shall be made by the member except if he/she is dead or physically and mentally incapacitated.
What will happen to funds lying in employee’s account in the EPF, in the event the employee dies
without nominating a beneficiary?
Under Section 24 (1) if a member dies before becoming entitled to claim EPF benefits and where the
nominees are also dead:
If the sum is not less Rs 20,000, then the balance lying to the credit of the member (after
deductions) will be paid to the executor of the Will or the administrator of the estate of the
deceased member.
If the sum is less than Rs 20,000 then it will be paid to the persons who are certified by the
Commissioner to be in his opinion, entitled by law to benefit.
Under Section 24 (2):
In the event there are many nominees and one or more are dead, then the EPF funds will be
equally apportioned and paid to the surviving nominees.
Employees Trust Fund (ETF)
The Employees’ Trust Fund Act No. 46 of 1980 (as amended) obliges the employer only to contribute
monthly 3% of the employee’s total wages to the Trust Fund created under it. This contribution brings
for members a life insurance cover and certain medical benefits.
The objective is;
- To promote employee ownership, employee welfare and economic democracy through
participation in financing and investment
To promote employee participation in management through the acquisition of equity interest in
enterprises
To provide for non-contributory benefits to employees upon retirement
Payment exceptions and surcharges are similar as in the EPF Act.
When can an employee claim benefits from the ETF?
Once every five years, during the period of employment.
Upon reaching the age of 60 years
Permanent migration
Cessation of employment due to permanent and total incapacity for work
Upon appointment in a pensionable service
In the event of the death of a member, the funds in the ETF account will be paid to the nominee
and if there is no nominee, then it will be paid to the executor or administrator of the member’s
estate or to his/her heirs.
Applications for claims must be duly filled in by the employers with details of the periods of employment and contributions made and must be submitted through the last employer of the member.
What are the benefits under the ETF social security programme?
A membership statement of account will be issued to members before 30th September every
year which contains details of annual interest, account balance, etc.
The benefits presently available under ETF are:
o Automatic Life Insurance Cover (subject to maximum of SLR 50,000/-)
o Permanent and Total Disability Benefit (subject to a maximum of SLR 200,000/-),
o Financial Assistance for Heart-Surgery (SLR 150,000/-)
o Financial Assistance for Kidney Transplant operations (SLR 150,000/-)
o Re-imbursement of Intra Ocular Lens Implant (SLR 9,000/- for each eye)
o 3000 Scholarships of SL Rs.15,000/- each will be awarded to children who get through
the Year Five Scholarship examination with merit.
o Hospitalized Medical Insurance Scheme (annually subjected to a maximum of SLR
25,000/-)
o Under the Housing Loan Scheme the maximum amount that can be obtained during
the membership period is SLR 50,000/-.
Gratuity
Gratuity to an employee is over and above the EPF and ETF payments discussed above and is
governed by the Payment of Gratuity Act No. 12 of 1983. A gratuity is a lump sum payment made in
recognition for services at the end of a period of employment.
Under the Act any employer who has employed more than 15 workmen in any industry during the
twelve months preceding the termination of the workman in question, is required to pay a gratuity to that workman if he has completed five years of service under him. The amount payable is as follows;
Monthly Paid Employee - Half of the monthly terminal salary for each year of service, completed by the worker.
Daily Paid Employee - 14 days salary for each year of completed service. The daily rate is deemed to
be the terminal daily rate received by the worker.
Piece Rated Employee - 14 days salary earned at piece rate, for each completed year of service. The
average daily earnings during the preceding 3 months before the cessation of employment of the
worker, has to be considered here.
The Payment of Gratuity Act was promulgated to achieve two main objectives:
(a) To make a payment of gratuity for the periods of service to the Indigenous workers of the estates,
which were acquired by or vested in the L.R.C., on or after May, 1971.
(b) To provide appropriate legal provisions for payment of gratuity to employees by employers.
Part I of the Act came into force with retrospective effect i.e. on 26.08.1972. All employees, except
Indian repatriate workers, who had completed a period of over 05 years uninterrupted service, on an
estate or an agricultural land, at the time of vesting or acquisition, under the land Reform Act or the
Land Acquisition Act, are covered by this Part and calculation of gratuity to those workers is set out In the Part I of the Act.
Part II of the Act came into operation with effect from 31.03.83. All employees attached to private sector establishments and state sector Corporations which employ 15 or more workmen are covered by this Part.
The Following employees are excluded from the coverage of this Part:-
(a) Employees, employed in establishments which have less than 15 workmen.
(b) Employees who do not count 05 years continued service.
(c) Employees attached to Government Owned Business Undertakings, Co-operative Societies and
Local Bodies.
(d) Personal chauffeurs and domestic Servants.
(e) Employees who are entitled to any non-contributory pension scheme.
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(f) Employees who are entitled to a more favourable gratuity under any Collective Agreement.
Can an employee gratuity payment be forfeited?
Gratuity can be forfeited only if the employee has been terminated for reasons of:
o Fraud
o Misappropriation of funds of the employer
o Willful damage to property of the employer
o Causing the loss of goods, articles or property of the employer
Only the amount of the loss or damage may be deducted from the amount of gratuity due under the
Act.
If the workman dies while employed, any gratuity due to him must be paid to his legal beneficiaries.