By Madhusha Thavapalakumar
The topmost apparel manufacturers in Sri Lanka are evaluating whether they should adopt the prorated salary scheme formulated by the Government or choose to pay their employees in full, The Sunday Morning Business learnt.
This is because paying the salaries in full would set an unhealthy precedent for the industry that smaller players with far greater financial strain would be expected to follow by their workers, putting these SMEs under immense pressure.
The Sunday Morning Business reliably learnt that the small and medium apparel manufacturers have started paying their employees on a prorated basis, following an agreement reached with the Government in early May. Under this new system, employers do not have to pay the full salary to an employee who hasn’t been required to report to the workplace or work from home.
Small apparel players had welcomed the prorated system and had implemented it without delay as it was a major relief to their businesses, which have been adversely affected by the curfew imposed islandwide and the resultant economic stagnation due to the local outbreak of Covid-19.
The system is applicable for two months and was included in a list of proposals submitted by the Employers’ Federation of Ceylon (EFC) to the Labour Minister on 25 April to provide relief to employers and prevent bankruptcies.
The system is designed to ensure that every employee receives a minimum monthly salary of Rs. 14,500, even if the said employee was not required to report to the workplace or work from home a single day of the month.
The employer is required under this system to pay such an employee 50% of the basic salary or Rs. 14,500; whichever is higher. If the employee was required to report to work or work from home for only a week in that month, he or she would be entitled to 25% of the total salary, including allowances. However, in addition to this, the employee would also be entitled to either 75% of Rs. 14,500 or 50% of what his or her basic salary would be for a three-week period.
However, if the employee has worked from home for an entire month, he or she would be entitled to the total salary, as it would be outside the scope of this scheme.
The apparel sector is the largest contributor in the country’s export basket. It is estimated that the apparel sector provides for the livelihood of around one million employees and contributes over 44% of the national export revenue.
The sector has been severely impacted due to the prevailing pandemic, with Joint Apparel Association Forum Sri Lanka (JAAFSL) foreseeing an immediate contraction of $ 1. 5 billion in Sri Lankan apparel exports during the three-month period ending in June, compared to the previous fiscal year. The apparel sector showed a 41% decline during the month of March 2020 compared to the same month in the previous year.
There have been tax cuts across the industry, mainly for employees above the lowest pay grades. The apparel sector is one amongst five sectors that has been granted with the Government’s six-month moratorium and 4% working capital loan.
The topmost apparel manufacturers in Sri Lanka are evaluating whether they should adopt the prorated salary scheme formulated by the Government or choose to pay their employees in full, The Sunday Morning Business learnt.
This is because paying the salaries in full would set an unhealthy precedent for the industry that smaller players with far greater financial strain would be expected to follow by their workers, putting these SMEs under immense pressure.
The Sunday Morning Business reliably learnt that the small and medium apparel manufacturers have started paying their employees on a prorated basis, following an agreement reached with the Government in early May. Under this new system, employers do not have to pay the full salary to an employee who hasn’t been required to report to the workplace or work from home.
Small apparel players had welcomed the prorated system and had implemented it without delay as it was a major relief to their businesses, which have been adversely affected by the curfew imposed islandwide and the resultant economic stagnation due to the local outbreak of Covid-19.
The system is applicable for two months and was included in a list of proposals submitted by the Employers’ Federation of Ceylon (EFC) to the Labour Minister on 25 April to provide relief to employers and prevent bankruptcies.
The system is designed to ensure that every employee receives a minimum monthly salary of Rs. 14,500, even if the said employee was not required to report to the workplace or work from home a single day of the month.
The employer is required under this system to pay such an employee 50% of the basic salary or Rs. 14,500; whichever is higher. If the employee was required to report to work or work from home for only a week in that month, he or she would be entitled to 25% of the total salary, including allowances. However, in addition to this, the employee would also be entitled to either 75% of Rs. 14,500 or 50% of what his or her basic salary would be for a three-week period.
However, if the employee has worked from home for an entire month, he or she would be entitled to the total salary, as it would be outside the scope of this scheme.
The apparel sector is the largest contributor in the country’s export basket. It is estimated that the apparel sector provides for the livelihood of around one million employees and contributes over 44% of the national export revenue.
The sector has been severely impacted due to the prevailing pandemic, with Joint Apparel Association Forum Sri Lanka (JAAFSL) foreseeing an immediate contraction of $ 1. 5 billion in Sri Lankan apparel exports during the three-month period ending in June, compared to the previous fiscal year. The apparel sector showed a 41% decline during the month of March 2020 compared to the same month in the previous year.
There have been tax cuts across the industry, mainly for employees above the lowest pay grades. The apparel sector is one amongst five sectors that has been granted with the Government’s six-month moratorium and 4% working capital loan.