Minimum Wages and Overtime Payment
Sri Lanka has a statutory minimum wage, and no worker in Sri Lanka can be paid less then this mandatory minimum rate of pay. Employers who fail to pay the Minimum Wage may be subject to punishment by the Labour Department.
While the Wages Board Ordinance of 1941 and Shop and Office Employees Act of 1954 play a dominant role in the wage fixing mechanism; Regulations, Collective and Individual Bargaining also work in the formal sectors of the Sri Lankan economy.
Presently 43 trades are covered by the Wages Board Ordinance which has a tripartite constituency and it is estimated that over 1.5 million workers from the plantation, agriculture and manufacturing industries receive minimum wage protection under this Ordinance.
Collective Agreements covered under the Industrial Disputes Act also work effectively in wage fixing for many trades in Sri Lanka where trade unions and the management of enterprises come to an agreement on the remuneration for a specified period and revised at the end of this period. Individual agreements between individuals and management also take place, but mostly in the private sector and between professionals and management.
During the past year, three minimum wages revisions were directed by the government through Gazette notifications - 1660/35 of 30 June 2010, 1664/24 of 30 July 2010 and 1668/19 of 27 August 2010. These Gazette notifications covered a total of 36 trades ranging from cigar rolling to civil engineering.
What are the main laws in Sri Lanka relating to wages and overtime payments?
Sri Lanka has two main laws relating to the payment and fixing of wages. These are:
- The Wages Board Ordinance of 1941, and
- The Shop and Office Employees Act of 1954
What constitutes Wages?
Wages include remuneration for the normal hours worked, as well as any remuneration due in respect of overtime work and paid holidays.
Wages are determined using indicators in the Colombo Cost of Living Index (CCLI), and Cost of Living Allowance (COLA). The wage also includes the employer’s contribution towards the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF).
There is no fixed minimum wage in Sri Lanka, it is dependent on the trade to which it applies; however, the lowest minimum wage is approximately SLRs 6,000 (USD 65).
What are the wage periods and what is the time for payment of wages?
Wages can be paid on daily, weekly, fortnightly or monthly basis. However, a wage period cannot exceed a month.
What is Cost of Living Allowance (COLA)? Am I eligible for it?
All employees in the private and public sector are eligible to benefit from COLA.
What is the overtime payment rate and how do I become eligible for it?
- According to Section 24 (d) of Minimum Wage Ordinance, the issue of work on holidays and the wages for such work should be at a rate not less than the overtime rate.
- If an overtime rate has been pre-determined, then it should be one-and-a quarter times the rate normally applied to such work.
- Holidays with or without pay must be granted on a day within a specified number of days.
- In the case of any special class of workers, payment for their work must be not less than one and a half times the normal rate, without a substitute holiday.
- According to The Shop and Office Employees Act the period of work for a day is eight hours, and for a week it is forty five hours. Therefore any additional hours of work is considered overtime. However this provision is not applicable to managers and executives in a public institution.
- The method of calculation of overtime per hour is: Monthly Salary x 1.5 / 240
- With regard to the overtime work of women and young persons, Section 67 of the Factories Ordinance considers any fraction less than half an hour as a period of half an hour and similarly any fraction greater than half an hour but less than a whole hour, actually as a whole hour of work.
What is the penalty for non-payment of wages and overtime payments?
Employers covered by the Wages Board Ordinance who fail to make overtime payments can be prosecuted in the Magistrate Court and similarly those employers covered by the Shop and Office Employees Act can be prosecuted in the Magistrate Court under Section 136 of the Code of Criminal Procedure Act.
- Under Section 3D Sub-section 2 of the Wages Board Ordinance, where an employer defaults on payments, the Commissioner can file action to recover wages, in the Magistrate Court and fined accordingly.
- Under the Shop and Office Employees Act (Sections 50 52), all offences under this Act may be tried summarily by a Magistrate and fined accordingly and in some cases, even imprisoned.
What type of deductions can be made from my pay?
According to Section 2 of the Minimum Wage Ordinance deductions from the wages of a worker may be made in the following instances:
- The price of any article of food supplied to the worker by the employer,
- Any contribution which the worker makes through the employer to a pension fund, provident fund, insurance scheme, savings scheme or medical or sickness benefit scheme, etc.
- Any contribution or subscription which the worker makes through the employer to any welfare scheme, trade union or temple fund, etc.
- The rent of any housing accommodation provided for the worker by the employer and any amount determined as security
- The price of any goods sold to the worker by the employer out of the goods kept for sale at the place of employment of the worker;
- Any loan taken by the worker from any fund or scheme
- Any interest chargeable on any loan or advance provided
According to the Shop and Office Employees Act, deductions from wages may be made by the employer in accordance with Section 19(1)(a)(iii) of the Act in respect of -
- Any contribution which the employee desires to make to any pension fund, provident fund, insurance scheme, savings scheme or recreation club,;
- The price of any food or any article of food or any charges for loading supplied or provided to the employee by his employer;
- The rent of any house provided for the employee by the employer; and any amount required to be furnished as security by the employee;
- Charge for any amenities or services provided for the employee
- The price of any goods sold to the employee out of goods kept for sale by the employer at the place of employment or at any other place;
- Any fine imposed on the employee by the employer in respect of any of the following acts or omissions:-
- Absence or late attendance without a reasonable excuse
- Causing damage or the loss of goods belonging to the employer, where the damage or loss can be directly attributed to negligence, willfulness or default of the employee
- Slacking, laziness or negligence at work
- Sleeping while on duty
- Theft, fraud or dishonesty
- Intoxication during working hours
- Insubordination or willful breach of discipline
- Incivility to any member of the public who attends the employer’s premises for the transaction of business
What do I need to do if I am not being paid my wages and overtime on time?
You should contact your Trade Union representatives and inform them of the denial of wages. Your Union will then inform the Commissioner of Labour, who will after inquiring into the issue and if no other option is available to recover your wages, the Commissioner will file a case before the Magistrate Court. This legal action can also be taken by your Trade Union if you are a member.
In the mercantile sector where employees are covered by the Shop and Office Employees Act; if wages are not paid, the Commissioner of Labour is empowered to intervene and recover same through legal action in terms of Sections 50, 51 and 52 of the Act. The errant employer will be charged in the Magistrate Court and Court is empowered to recover balance wages with a surcharge.
The sources of information for this article are the Wages Board Ordinance (1941) and the Shop and Office Employees Act (1954).