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| Sunday, 20 March 2005 |
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Chamber heads take new Compensation Formula to task by Hiran H.Senewiratne The UPFA Government's new Compensation Formula released last week came under heavy criticism by top chamber heads due to its excessive payment methods, un-competitiveness and non-investor-friendly situation. The government believes that this formula will considerably enhance compensation payments of private sector employees in the event of termination of employment.However, top businessmen and employers are of the opinion that this would hinder the development of the country. Minister of Labour and Foreign Employment Athauda Seneviratne announced the details of the formula last week. Under the new formula the compensation would be worked out as 2.5 months salary for a year to workmen with 1-5 years of service (Maximum 12.5 months salary), two months for those with 6-14 years service (maximum 30.5 months), 1.5 months for those with 15-19 years service (maximum 38 months), one month for those with 20-24 years of service (maximum 43 months) and 0.5 months for those with 25-34 years of service (maximum 48 months). However, the Compensation Formula has a serious negative impact on investor promotion, job creation and overall competitiveness in the production sector, Director- General Employers' Federation of Ceylon Gotabaya Dasanayaka said. He said this formula is highly excessive and does not comply with either regional or international standards. The issues raised on the formula were not merely in the interest of employers.This would affect the overall interest of investment, job creation, enterprise competitiveness and moreover national competitiveness in the current global economic environment, he said. He said that the formula has negated and overlooked certain provisions in the Termination of Employment Act. Dasanayaka said that the formula is excessive not only when compared with the formula that is currently gazetted but also in relation to similar formulae internationally and particularly in the Asia region. The formula does not take into account the affordability factor of an employer ie - formula is totally unrealistic to expect an employer who is facing a financial crisis and requires to restructure an enterprise for survival, he said. In such a situation the employer is compelled to pay as much as 40 months salary per employee to re trench employees who have 20 years service, the Director-General, said. President- Federation of Chamber of Commerce and Industry of Sri Lanka (FCCISL) Nawaz Rajabdeen said that the formula is not investor friendly and uncompetitive for enterprises, and this would hinder the economic growth in the long run. He said that would not address issues relating to bankruptcy of an entity. |
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