Sri Lanka Needs a New Framework for ‘Precarious Workers’

Priyanka Jayawardena writes that although Sri Lanka managed to reduce unemployment rates despite the global downturn, Sri Lanka simultaneously saw an increase in the incidence of precarious work, and now more than half of all employees are temporary or casual workers.

 

As the global economic crisis put various pressures on employment, it is not only the loss of jobs, but also the rise of temporary forms of employment that have become more prevalent in both developed and developing countries. In response to economic insecurity and market instability, the increase of jobs of a ‘precarious’ nature is receiving more attention. Despite the pressures of the global downturn, Sri Lanka managed to reduce unemployment rates to as low as 4% by 2012. However, the country has simultaneously seen an increase in the incidence of precarious work in recent years, and now more than half of all employees are temporary or casual workers. This raises serious concerns on the status of ‘decent work’ in Sri Lanka.

 

What is precarious work?

 

Precarious work is part of a global business strategy – a practice adopted by employers to shift risks and responsibilities onto workers. Precarious workers are those who perform duties and tasks of permanent employees but are not protected with the rights of permanent employees. These workers are employed on temporary contracts for varying durations.

 

“It is a precarious work arrangement because it is often unclear as to who is responsible and accountable for workers’ rights and benefits”

 

Another form of precarious work is a disguised or ambiguous employment relationship – a lack of clarity on the identity of the employer. For example, firms hire workers for their core business activities through agencies, often through subcontractors, franchisers and manpower agencies. These workers are hired by an agency or subcontractor but perform their duties for a separate company. It is a precarious work arrangement because it is often unclear as to who is responsible and accountable for workers’ rights and benefits.

 

Why should we worry about precarious workers?

 

Temporary contracts usually undermine the benefits accrued to employees – a lack of access to social protection and benefits, legal and practical obstacles to joining a trade union and bargaining collectively, and susceptibility to hazardous working conditions. These workers are highly insecure as they know they are easily replaceable. The International Labour Organization (ILO) recognized this spread of precarious work as a ‘worldwide corporate attack on the right to organize and bargain collectively, by shifting to subcontracting and individual contracts, attacking sectoral and national bargaining, and evading employer responsibilities by complicating what should in fact be a direct employment relationship with their workers’.

 

Recent trends in precarious work

 

 

Sri Lanka is seeing an increasing prevalence of temporary/casual employees. In 2012, out of total public sector and private sector employees (4.6 million), 2.5 million, or 54% were precarious workers – temporary/casual workers or workers without a permanent employer. Moreover, temporary and casual workers have increased at a faster pace than permanent employees over the 2006-2012 period (see Table 1). By 2012, 16% of all employees did not have permanent employer.

 

Table 1: Permanency Status of Employee (%)

2006 2012
Permanent 46.2 45.7
Temporary/casual 36.1 38.3
No permanent employer 17.7 16.0
Total 100.0 100.0

Source: Authors calculations based on Labour Force Survey data for 2006 and 2012

 

The increase in private sector employment in recent years has mainly been in temporary and casual jobs.To increase enterprise profitability and to circumvent rigid labour laws, Sri Lankan firms have been keeping their permanent workforce to a minimum while increasing temporary or casual workers. LFS data reveals that 92% of temporary and casual workers are attached to private sector.

 

“Between 2006 and 2012, temporary and casual workers in the private sector increased by 21%”

 

Between 2006 and 2012, temporary and casual workers in the private sector increased by 21% while permanent employees increased only by 5%. This reflects the fact that in recent years the private sector has created more precarious jobs than permanent ones.. From an employer’s perspective, the reasons behind this include high labour turnover, catering for seasonal demand, the cost of regular labour, and also nature of service (outsourcing for call centers, janitorial and security staff of work places.

 

 

Rise of agency-hired workers in EPZs

 

Although data limitations prevent an accurate estimation of the extent of agency-hired workers (through manpower agencies), it is a well known practice in Sri Lanka, particularly in the country’s Export Processing Zones (EPZs). Formal manpower agencies supply workers for EPZ firms for their core business on temporary or even without written contracts, leaving them very vulnerable to precarious work arrangements. There are arrangements for daily hiring of workers where manpower brokers hang around the EPZs and supply workers for firms to meet their daily labour requirements. Some firms form their own manpower agencies from which they can hire workers at a cheaper rate, with diluted worker rights. However, depending on hired workers does have negative implications for firms as well. For instance, problems with irresponsible workers, inexperience workers, and problems associated with longr-term human resource gaps.

Transforming precarious work to decent work

One way of transforming precarious work to decent work is by paying more attention to creating more and better jobs. This can be done through introducing tighter labour standards under company/business registration related to restrictions on temporary hiring for core business activities. Meanwhile, firms must strive to limit the use temporary and agency-hired workers to legitimate instances only, for instance, in meeting seasonal demand of firms and to provide supplementary services (security, janitorial, etc.). Firms should also not be allowed to increase temporary or agency-hired workers above a reasonable threshold.

 

“In the past 5-6 years alone, the number of precarious workers rose by over 300,000 in Sri Lanka”

 

Another way of transforming precarious work to decent work is by better regulation of precarious work in order to safeguard workers’ rights. As agency workers are not protected by most labour laws, it is important to devise a regulatory mechanism that better protects their rights – addressing issues of stability, equality of employment conditions, social protection, etc. As a first step, the issuance of letter of employment to all temporary employees should be made compulsory for the firms. Also, mandatory employee insurance is recommended for all hired workers to cover all workplace-related accidents. Meanwhile, a far-reaching awareness campaign on the rights of agency-hired workers will help in protecting their rights as both firms and workers will have more information and avenues for legal redress.. Further, rigorous monitoring of EPF/ETF registration, and frequent labour inspections, will help with the transformation.

 

Much of this cannot be achieved without better regulation of manpower agencies At the very least, all the manpower agencies should be registered under the Department of Labour.

 

In the past 5-6 years alone, the number of precarious workers – those not covered by labour laws and susceptible to their rights being violated, rose by over 300,000 in Sri Lanka. These workers are in a highly disadvantaged position. They often earn lower wages regardless of their experience and education and suffer job insecurity due to uncertainty on whether their contract will be extended or faceunjustified termination of employment. Better regulation, and a reformulation of the policy framework, is urgently needed to tackle this, in order to secure the best interests of workers, while also recognizing the evolving labour needs of Sri Lankan firms.

 

 

This article is based on the policy brief titled “Precarious Work in Sri Lanka : The Need for a New Policy Framework” contained in the forthcoming ‘Sri Lanka: State of the Economy 2014’, the IPS flagship annual publication.


  • Jayasri

    I congratulate Priyanka and IPS for venturing in to this research analyzing the trend in the Labour market. If policy makers are serious to address the increase in the income inequality in society – As per WEF increased income in-eqality- is the No 1 risk for businesses. This apply to Sri Lanka as well.

  • Bandula Idamegama

    Priyanka Jayawardena’s research paper entitled “Sri Lanka needs a new framework for ‘precarious workers’ is very good indeed. Wonder whether she knows that precarious work has crept into the formal plantation industry too? This is how it works in tea plantations managed by the Regional Plantation Management Companies (RPMCs) – they divide a given plantation into plots containing 1,000 tea shrubs and each plot is given to a worker who is supposed to attend to every task from weeding, fertilizing, application of pesticides to plucking etc and the worker concerned is paid a fixed lump sum and s/he is not entitled to leave, EPF/ETF, maternity benefits and worker compensation etc and is not covered by the standard Collective Bargaining Agreement in place. Now, in cahoots with the employers, the government is actively encouraging the expansion of tea small-holdings where precarious work is the accepted norm. Needless to say, the said employment practice is the death knell of the formal side of the plantation industry. Wonder if our Tea Research Institute is making any holistic input to make the industry sustainably viable? I feel that our product – Ceylon Tea – should be moved up the value-chain to cater to the discerning western consumer, if the industry is to recover its viability.

  • Priyanka

    Thanks for your interest and sharing your thoughts on above crucial timely topic in Sri Lanka. We have planned to do further research on above and will do contact you to get your inputs for this from your experience.

  • Ravi Peiris

    The aricle states that “temporary contracts usually undermine benefits accrued to employees with a lack of access to social protection and benefits ……” I do not agree with this statement. All our superannuation laws cover any employee who has a contract of service with an employer, irrespective of whether the contract is temporary or permanent. The EPF and ETF Acts cover even a casual worker. Furthermore, the Gratuity Act covers any worker who has uninterrupted service for a period of 5 or more years. In other words, continuous fixed term contracts for 5 years back to back would make that employee entitled to
    gratuity. Similarly, the right to join and form a trade union is also available to all citizens in Sri Lanka guaranteed under the fudamental rights in the Constitution.

    Therefore, it is not that the laws do not cover such workers but in most cases, some employers evade the laws. Therefore, the problem is there being no proper labour inspection over all employers.

    The article also deals with hiring labour through agencies/contractors. It also tries to show that such work is “precarious”. Hiring labour envisages a person getting work done through another person employing workers. Quite apart from this, there is also the ILO Convention on private employment agencies where the
    concept of hiring labour through a third party agency is accepted on the basis of those workers also enjoying all the rights of workers engaged in direct employment.

    Therefore, it is incorrect o say that “agency workers are not protected by most labour laws”. I am unable to comprehend as to how one could conclude that during the “past 5 to 6 years alone the number of precarious workers – those not overed by labour laws …. rose by over 300,000 in Sri Lanka”. This is a very serious comment. It could have a very adverse effect on Sri Lankan Products.

    In my view, the problem is not that they are not covered by the laws. There are adequate laws to cover them. There are two main reasons for employees being engaged on temporary contracts of employment and also not being granted benefits under the laws. The reasons are as follows:

    a. The rigidity of our labour laws, especially laws relating to retrenchment/redundancy/termination. This prompts employers to hire on temporary contracts.

    b. Poor implementation of the law by Labour authorities.