Social Security and Pensions in Sri Lanka

Social Security and Pension Schemes in Sri Lanka: Social security provisions exist for both public sector and private sector employees. The Pensions Department which administers the Pensions Fund does so under the regulations contained in the Minutes on Pensions.

What are the laws on the provision of social security/pensions in Sri Lanka?

Social security provisions exist for both public sector and private sector employees:

Public Sector

  • The Pension Fund

Private Sector

  • The Employees’ Trust Fund (ETF) administered under Act No. 46 of 1980 is an interim benefit designed to assist the employee during his/her working life
  • The Employees’ Provident Fund (EPF) administered under Act No. 15 of 1958 is a retirement benefit
  • The Payment of Gratuity Act No. 12 of 1983 is a payment made to employees who have served continuously for five years and more under one employer

As a pensioner what should I know about the Pensions Fund social security programmes?

The Pensions Department which administers the Pensions Fund does so under the regulations contained in the Minutes on Pensions.

  • Employees are eligible to retire and avail of pension benefits at the age of 55 years.
  • In order to benefit from the Pension Fund, the public service official should have120 months of unbroken service in a permanent pensionable post.
  • Form 86 must be filled in and sent to the Pensions Department in order to contribute to the Widows' and Orphans' Pensions scheme
  • At the time of applying for pension benefits, Form 'A' should be filled in and forwarded to the Pensions Department.
  • In order to apply for Widows and Orphans Pensions, a request should be made to the relevant Divisional Secretary with the original death certificate of the pensioner and the Widows' and Orphans' Pensions number after the death of pensioner.
  • The widow of the pensioner, unemployed unmarried female children who are less than 26 years, and unemployed male children who are less than 26 years are eligible to benefit under the Pension scheme
  • Death gratuity will be paid to dependents of a deceased officer who was employed in a permanent pensionable post and had 60 months unbroken service period.
  • Any pension gratuity obtained by a pensioner will be reduced from the pension in equal installments during a period of 10 years and the full pension will be paid after that.
  • A commuted gratuity is equivalent to 24 times the unreduced monthly pension.
  • A Pension Award paper is the letter which is issued at the time of retirement of an employee

What is the Employees’ Trust Fund (ETF)?

The main objectives of ETF are:

  • To promote employee ownership, employee welfare and economic democracy through participation in financing and investment
  • To promote employee participation in management through the acquisition of equity interest in enterprises
  • To provide for non-contributory benefits to employees upon retirement

Who can be a member of the ETF?

All workers who are employed in private and public sector undertakings in the following categories are eligible to membership under the ETF:

  • Permanent
  • Temporary
  • Casual
  • Contract
  • Piece-rate wages
  • Learners and apprentices

The Act exempts:

  • Domestic servants
  • Employees in religious, social or charitable institutions employing less than 10 employees
  • Industrial undertakings training juvenile offenders, orphans, or persons who are destitute, deaf or blind
  • Businesses where only family members are employed
  • Persons who are self-employed and migrant workers are also eligible to ETF membership on a voluntary basis as published in the Schedule in Gazette Extraordinary No. 171/2, 14/12/81.

What is the contribution and who makes it to the ETF?

  • Every employer to whom the ETF Act applies must make a contribution on a monthly basis of 3 percent of the total earnings of the employee.
  • There is no recovery from the employee and the liability of this contribution lies solely with the employer.
  • If the employer delays in forwarding the contributions according to the legal timeframe, then the employer is liable to a surcharge.
  • Under Section 44, ‘earnings’ is defined as:
    • Wages, salary or fees
    • Cost of living allowance, special living allowance and other similar allowances
    • Payment in respect of holidays
    • The cost value of cooked or uncooked food provided by the employer to employees
    • Meal allowance
    • Any other forms of remuneration as may be prescribed (by the ETF Act)
  • The following payments are not considered a part of earnings and exempted from ETF:
    • Incentives, attendance, productivity or night allowance
    • Overtime
    • Bonus
    • Service charge
    • Supervising allowance
    • Acting allowance
    • Professional allowance
    • Festival allowance
    • Housing allowance
    • Travelling allowance (reimbursed)
    • On-call allowance
    • Hourly payment made to lecturers

When can I claim my benefits from the ETF?

You can claim from the ETF:

  • Once every five years, during the period of employment.
  • Upon reaching the age of 60 years
  • Permanent migration
  • Cessation of employment due to permanent and total incapacity for work
  • Upon appointment in a pensionable service
  • In the event of the death of a member, the funds in the ETF account will be paid to the nominee and if there is no nominee, then it will be paid to the executor or administrator of the member’s estate or to his/her heirs.
  • Applications for claims must be duly filled in by the employers with details of the periods of employment and contributions made and must be submitted through the last employer of the member.

What are the benefits under the ETF social security programme?

  • A membership statement of account will be issued to members before 30th September every year which contains details of annual interest, account balance, etc.
  • The benefits presently available under ETF are:
    • Automatic Life Insurance Cover (subject to maximum of SL Rs. 50,000/-)
    • Permanent and Total Disability Benefit (subject to a maximum of SL Rs.200,000/-),
    • Financial Assistance for Heart-Surgery (SL Rs.150,000/-)
    • Financial Assistance for Kidney Transplant operations (SL Rs. 150,000/-)
    • Re- imbursement of Intra Ocular Lens Implant (SL Rs. 9,000/- for each eye)
    • 3000 Scholarships of SL Rs.15,000/- each will be awarded to children who get through the Year Five Scholarship examination with merit.
    • Hospitalized Medical Insurance Scheme (annually subjected to a maximum of SL Rs. 25,000/-)
    • Under the Housing Loan Scheme the maximum amount that can be obtained during the membership period is SL Rs. 50,000/-.

What is the Employees’ Provident Fund (EPF)?

  • The EPF was established to provide for the payment of superannuation benefits to persons employed in the private and corporate sectors, through a contributory mechanism provident fund.
  • The objective of the Fund is to ensure that an employee receives a lump sum in his/ her old age whereby he/she and the family can live in retirement without depending on the State or society.
  • It applies to all employers and employees in covered employment
  • It includes apprentices and learners who are paid remuneration but does not include the spouse of the employee or members of that family.

What are the obligations of my employer under the EPF Act?

  • All employers of covered employment registered with the Commissioner of Labour must remit the EPF contributions to the Central Bank of Sri Lanka
  • The employer is required to deduct eight percent from the earning of the employee and contribute twelve percent from the organization towards the EPF account of the employee.
  • The definitions of ‘earnings’ and ‘non applicable earnings’ in the EPF Act are similar to that in the ETF Act.
  • If the employer delays in forwarding the contributions according to the legal timeframe, then the employer is liable to a surcharge.

When can I claim my EPF benefits?

  • Under Part III of the Act, Section 23, a member can claim EPF benefits:
    • Upon reaching the age of 55 years (man) and 50 years (woman).
    • Women can also claim upon ceasing to be unemployed after marriage.
    • Due to permanent and total incapacity for work and being certified by a registered medical practitioner
    • On emigrating from Sri Lanka
    • Upon taking up pensionable employment in the public service, local government, in district service, or in the service of any local authority other than local government service.
  • Under the Amendment Act No. 14 of 1972, an employee in a public corporation or government owned business undertaking can withdraw the total amount lying to his/ her credit upon being retrenched from service.
  • Under Section 30 every claim for benefits by a member shall be made by the member except if he/she is dead or physically and mentally incapacitated.

What will happen to funds lying to my account in the EPF, in the event I die without nominating a beneficiary?

Under Section 24 (1) if a member dies before becoming entitled to claim EPF benefits and where the nominees are also dead:

    • If the sum is not less Rs 20,000, then the balance lying to the credit of the member (after deductions) will be paid to the executor of the Will or the administrator of the estate of the deceased member.
    • If the sum is less than Rs 20,000 then it will be paid to the persons who are certified by the Commissioner to be in his opinion, entitled by law to benefit.

Under Section 24 (2):

  • In the event there are many nominees and one or more are dead, then the EPF funds will be equally apportioned and paid to the surviving nominees.

What rules apply if I am a member of an Approved (Private) Provident Fund?

  • Part IV of the Act permits the existence of Private provident funds and contributory pension schemes.
  • If the Commissioner is dissatisfied with the management of any approved private provident fund or pension he may revoke the declaration and all monies lying to the credit of the members shall be transferred to the EPF.

What are the benefits under Payment of Gratuity?

  • The Payment of Gratuity Act No. 12 of 1983 provides for the payment of gratuity by employers to their employees under the Amendment to the Land Acquisition Act, the Land Reform Law and the Industrial Disputes Act. The Act has two parts:
  • Part I applies to workers in the plantation sector who ceased to be employed upon the take-over of estates or lands which were vested in the Land Reform Commission.
  • Part II of the Act makes every employer who has 15 or more workers on any day during a 12 month period, liable to pay gratuity.
    • If the worker has completed five years or more of service prior to termination, the employer must pay that worker within a period of 30 days, half a month’s wages or salary for each year of completed service.
    • The gratuity will be calculated against the last month’s wage drawn by that worker.
    • When the worker is a piece-rated worker, the daily wage or salary shall be computed by dividing the total wage received by him/her for a period of three months immediately preceding termination, by the number of days worked by him in that period.
  • The Amendment Act No. 41 of 1990 has provided for the payment of gratuity to employees of public corporations and government owned business undertakings if they are converted into public companies.

Which categories of workers cannot benefit from the Payment of Gratuity Act?

  • Domestic workers
  • Personal chauffeurs in private households
  • Employees of co-operative societies
  • Employees who are entitled to a pension under any non-contributory pension scheme
  • Workmen designated under the Indian Repatriates (Special Provisions) Law of 1978
  • Any establishment employing less than 15 persons during the period of 12 months immediately preceding the termination of services of a worker

Can my gratuity payment be forfeited?

  • Your gratuity can be forfeited only if you have been terminated for reasons of:
    • Fraud
    • Misappropriation of funds of the employer
    • Willful damage to property of the employer
    • Causing the loss of goods, articles or property of the employer

Are Migrant workers also included under the Pensions Scheme?

  • There were attempts by the government to introduce a pension scheme for migrant workers and private sector employees in 2011.
  • However since the provisions in the Bill were not fair and equitable towards the private sector as well as migrants, mass protests prevented the Bill from being read in Parliament.
  • Migrants are however entitled to become voluntary members of the Employees’ Trust Fund and make monthly contributions to the Fund.