January, 15, 2021
In a meeting today (15) between the Minster of Labour Nimal Siripala de Silva and the Chairmen of all Sri Lankan Regional Plantation Companies (RPCs), a final proposal has been submitted towards ensuring a sustainable earnings model for the sector.
This proposal takes into consideration the sustainability of both the industry and livelihoods of plantation workers.
“After a very productive meeting with the Honourable Minister, RPCs have arrived at a final consensus on what we can sustainably offer, while providing the highest possible earnings potential for our workers. Our final offer amounts to a 30% increase in earnings on the fixed model, and there is no upper limit to what workers can earn under the productivity-linked components. This is the first step to modernising our entire industry, and moving beyond a basic daily wage system which is a relic of the colonial era and long overdue for an update."
“We have gone well beyond the Rs. 1,000 daily wage demand of Trade Unions, and this follows a 40% increase from just two years ago. At a time when others in the apparel and leisure sector are slashing wages and retrenching workers, ours is one of the precious few export industries which has shielded our employees from the negative impacts of the pandemic, and is actively pursuing a wage increase. This is no easy feat, and without improvements in productivity, it will still be extremely difficult for any RPC to remain financially sustainable. There is clear understanding from the Government on our position, and it is now up to Trade Unions to make the right decision,” Chairman, Plantation Services Group, Employers’ Federation of Ceylon said.
Under the final proposal, RPCs are offering a fixed daily wage of Rs. 1,105, with the re-introduction of attendance and productivity incentives - a feature which Trade Unions had strongly and consistently opposed in the past, but have since reversed their position in the most recent negotiations.
The breakdown is as follows: Basic Wage – Rs. 700, EPF/ETF – Rs. 105, Attendance Incentive – Rs. 150 and Productivity Incentive – Rs. 150. Under the new proposal, workers will receive a substantial Rs. 6,250 increase to their monthly earnings.
Further to the revised daily wage model, RPCs also propose the implementation of productivity-linked earning components to ensure that workers are finally provided effective incentives and are rewarded for increasing their productivity.
The proposed fixed daily wage model will be implemented 3 days a week, and on the remaining days, RPCs have called for one of two productivity-based models to be implemented based on how suitable they would be to each RPC’s unique capacity - enabling workers to earn far more than the fixed Rs. 1,105.
Under the productivity-linked component, employees can earn Rs. 50 (inclusive of EPF/ETF) for every kilo of tea leaf plucked. In the case of Rubber, this would amount to Rs. 125 (inclusive of EPF/ETF) for every kilo of rubber latex.
Alternatively, employees will be remunerated based on a revenue share model, offering greater earnings, similar to what has long been practiced with success in the smallholder sector in Sri Lanka. Companies who do not wish to continue with either of these models, will reserve the right (at their sole discretion), to continue with the standard daily wage system.
Currently, the Cost of Production (COP) of tea amounts to Rs. 615 a day, higher than any other tea producing nation in the world. Out of this, cost of labour accounts for 63% of the total cost of production. With the proposed increase in daily earnings to Rs. 1,105, the COP will increase up to Rs. 730 a day. Unfortunately, increasing cost of production is expected to be met with stagnant prices in local and international markets, further annihilating the economic viability of the industry.
Previously, the auction price of RPC tea reached an all-time high of Rs. 601 per kg on average (USD 3.99) in 2017 and has since plunged to Rs. 581/kg (USD 3.16). However, Sri Lanka’s global market price for tea has become increasingly uncompetitive, especially in comparison to USD 1.94 for tea at the Mombasa auction in Kenya. Competitors like Kenya have seen a significant increase - as much as 50% - in crop output which has resulted in an oversupply in the global tea market, forcing the market price of tea to reduce further.
"The tea industry has been crushed by unfavourable market conditions globally, and locally. Deteriorating economic conditions owing to COVID-19, transport and logistical difficulties owing to global lockdowns and a fast depreciating rupee have threatened the sustainability of the industry, and the legacy of Ceylon Tea. There is still a viable, sustainable way forward, but in order to proceed, all stakeholders have to understand these fundamentals: we cannot pay more than we earn. We cannot control global market dynamics. The only way to reach a sustainable trajectory for Ceylon Tea, is to raise productivity. Anything less will totally destroy this industry. We urge remaining stakeholder groups to consider these facts extremely carefully before proceeding."
“We are confident that the Minister, along with H.E. the President sees the value in our proposals and recognises how critical they will be to securing the sustainability of our industry. By now, we have submitted numerous proposals, all of which have been rejected out-of-hand by Trade Unions, who have failed to submit any viable alternative. We understand that political expediency may be driving them to offer token resistance to anything we say, but they must understand that we are not opposed to increasing worker earnings. Given our shrinking labour force, we must find ways of attracting and retaining labour, which means updating the way in which we remunerate them to match global best practices. However if they fail to agree to our final offer, it can only lead to the abrogation of the Collective Agreement, making all terms and conditions within it null and void. Thereafter we can only go to the Wages Board. This is not even a measure that we wish to take, as it will not give the workers the best deal. But without a Collective Agreement, it is the only option left," he said.
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