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Over 180 countries adopt Global Jobs Pact

To recover from global crisis:

Director General, Employers' Federation of Ceylon (EFC) was interviewed by Daily News Business on the job market and the current employment situation in the country.

Here are his views:

Q: Do you have any official figures on job losses?

Ravi Peiris

A. One important factor that we need to take into account is that it is extremely difficult to give an accurate figure in relation to job losses as it could arise in various forms. Sri Lanka having a large informal economy which is almost 70 percent, will find it difficult to make an accurate assessment with regard to job losses.Another important factor is the 'hidden' loss, which may not be reflected in statistics. That is the number of vacancies which occur due to resignations / retirements, not being filled. This is also a loss to a potential job candidate. However, there have been figures thrown in by various organizations.

The total number of employed persons in Sri Lanka is estimated at about 7.7 million in the first quarter of 2009. When you compare the employed population as per the first quarter of 2008 compared to 2009 (excluding the Northern province), there has been 96,000 job losses in the Industries sector, whereas there has been employment generation of 203,000 in Agriculture and 21,000 in Services sectors.

The EFC also undertook a survey amongst the 540 employers within its membership. 129 responded to this survey. During the period 2007/2008, 329 employees have accepted VRS packages, out of which 308 (almost 94 percent) belong to non executive categories.

On the other hand, during the period 2008/2009, there have been 614 employees who accepted VRS packages, out of which 352 (57.3 percent) have been employees in the executive and management categories. Altogether, 21 companies have offered VRS packages out of 129.

Q: Is it possible to design safety nets for the temporarily unemployed? what have other countries done to take care of the people who lose jobs in the short term?

A: A social security system such as a safety net is desirable. However, we cannot introduce such a system, which will result in burdening the employer again.

One of the fundamental flaws in our labour relations framework in Sri Lanka is that it depicts a mismatch between the economic policies of a developing country and the social policies of a developed country. Unfortunately, the social policies of developed countries fall squarely on employers and not the Government. The best example is Termination of Employment of Workmens'Act of 1971, which grants one of the highest retrenchment compensation packages in the world (Doing Business 2009 World Bank /IFC).

Therefore, we need to look at an unemployment benefit scheme in terms of the prevailing social security schemes such as EPF and ETF. The ETF is in a very strong position to fund an unemployment benefit scheme. The monthly contribution of employers to the ETF is approximately Rs 700 million. The total fund consists approximately Rs 88 Billion.

There are countries which do have safety nets funded partly by the Government. In some developed countries, a certain percentage of the salary (depending on years of service) is paid over one to two years once the unemployed person registers with the authority. What needs to be taken into account in this regard is that the employee also contributes monthly when he is working, towards this fund. During the period in which he receives this payment he could be called up at any time for an alternate job consistent with his ability and skill.

If the employee is found to be deliberately avoiding the job opportunity, the payment can be withdrawn. Therefore, such a system clearly shows that there needs to be a very effective monitoring system in place as the possibility of abuse is great.

Q: Is it inevitable that companies need to shed excess staff at times like this? Given the prevailing labour laws do the employers consider this as an opportunity to retrench excess labour and get the right size of cadre?

A: One of the main allegations that have been levelled against employers by not only trade unions but also independent consultants and certain organizations both locally and internationally, is that some employers have made use of this opportunity and exploited the situation to gain maximum advantage. I do not think it is a fair comment. Very often it has been pointed out that the employers immediate reaction to the crisis is to look at employee costs and reduce it by retrenching workers. Although this may be true in certain situations one needs to appreciate that in the Sri Lankan context, our industries which have been most affected have been the export industries which have been totally labour intensive and the impact of loss of orders directly affects employment of workers.

Having said this, it is also important to say that some organizations have carefully assessed the question whether the restructuring needs to be done in relation to the people doing the work or the method of doing the work. I am happy to record that in the survey conducted by the EFC, out of 129 organizations, 57 have clearly stated that they will not offer a VRS package to their employees during this year and a further 48 have mentioned that it is unlikely that they would do so during this year. This amounts to approximately 91 percent. These organizations have also mentioned various other restructuring methods such as job rotation, job sharing, changed work arrangements (shifts), relocation of employees to other Divisions/Companies within the group.

Q: The labour laws in Sri Lanka have not been changed much. You have been proposing many changes. While a total turnaround may not be a politically feasible option it is essential that we approach this on a step by step basis and what are the first steps that we may be able to pursue?

A: Successive Governments in Sri Lanka have recognized the private sector as being the engine of growth. Certainly and undoubtedly. The private sector which has largely contributed to the resilience of our economy during the worst periods.

Notwithstanding this contribution, the business sector has not been given the required policy framework and the necessary changes needed in terms of ensuring higher productivity and efficiency in employment. Now that the war is over, we have a great opportunity.

The most important and imminent change that we need right now is to ensure that what is set out in "paper" be translated into positive action through the required reforms in our labour legislation. In this regard, it is pertinent to refer to the National Productivity Policy and the Ten Year Horizon Development Framework (Mahinda Chintana) of the Government which clearly recognizes improvement enhancing productivity as being the key to increase efficiency.

But it has not resulted in making any changes in the legal framework in the areas such as holidays, wages, flexibility in work arrangements.

Another important change that we need to introduce is to limit the access of the type of employee in obtaining relief in respect of retrenchment/termination of service either under the TEWA or the Industrial Disputes Act.

We have seen Chief Executive Officers and expats who in their own countries would not have got any compensation, receiving millions of rupees as compensation for loss of employment. This was certainly not the intention of the legislature when it introduced these laws.

Q: In the new era we are hoping for many opportunities for the private sector. Does our workforce possess the skills that may be required in the short to medium term ?

A: Sri Lanka has enormous talent in its human capital which needs to be effectively harnessed. It is my view, both in terms of building bridges between communities and looking towards future opportunities in IT and service sectors, that we need to promote teaching of the English language with much more enthusiasm. We need to find proper teachers to ensure that all students in Sri Lanka would have proper teaching of the language in schools. Incentives need to be given to good English teachers to be stationed out of Colombo in the rural areas.

Secondly, we must also penetrate into the knowledge economy which will have quite a few opportunities on account of the recession. The BPO industry is something we need to look at seriously. There could be many opportunities in offshore service sector industries.

Q: Is there a good dialogue in place between employers and employees on the crisis, its impact and the way forward?

A: At the International Labour Conference in Geneva recently, one of the key issues that were discussed by the social partners was the manner in which the social partners respond to the crisis.

The tripartite constituents of 182 countries deliberated this issue and were successful in adopting a Global Jobs Pact which was regarded as a framework to recover from the crisis.

The Global Jobs Pact underlines the need for private sector development as a means to achieving economic and social progress. It advocates open markets and eschews protectionism. The Pact also calls for schemes to help companies to get through the crisis through mechanisms such as work sharing and partial unemployment benefits. The Pact specifically stipulates that we cannot adopt a "one size fits all" response. Some of the key features of the Pact are as follows:

It recognizes the reality that enterprises are struggling to survive, some are going out of business, others are laying off staff.

It notes the dangers of deflationary wages but nowhere calls for wages to increase.

It specifically mentions that education and training remain the most important means to improve employment prospects and are key to future growth and productivity.

It reiterates the importance of dialogue in finding solutions.

We feel that this Global Pact provides employers with an authoritative pro business policy announcement by the ILO and is therefore a powerful advocacy tool for employers in their lobbying of national governments. What needs to be emphasized is that our Sri Lankan delegation which consisted of the representatives of the Government, trade unions and employers have all subscribed to this Pact and our trade union colleagues are also part of it.

It is important that we discuss mechanisms to overcome the effect of the crisis depending on the requirements of the business.

Establishing mutual trust and confidence is very important as one of the biggest fears among trade unions is that employers would make use of the crisis and exploit it to get maximum advantage. Sharing relevant information is important to ensure that everyone understands the situation.

In making changes look at internal redeployment, retraining, change of work patterns and work schedules. Consider terminations/lay offs as a last resort. We need to adopt Socially Responsible Restructuring.

Need for private sector development

The tripartite constituents of 182 countries adopted the Global Jobs Pact, which was considered to be a framework response to recover from the global crisis, at the 98th International Labour Conference held in Geneva last month.

The Global Jobs Pact underlines the need for private sector development as a means to achieving economic and social progress. It advocates open markets and eschews protectionism. This gives the social partners in Sri Lanka a solid foundation to strengthen relations and establish mutual trust and confidence between each other to face the challenges of the crisis.

At a time when Sri Lanka is blessed with opportunities for development, it is important that the social partners get together and act in a responsible manner for the development of our country.



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