Employment Laws In Sri Lanka

Contractual Agreements

Contractual agreements in Sri Lanka are primarily governed by the Shop and Office Employees (Regulation of Employment and Remuneration) Act. 

According to the contract employment law in Sri Lanka, the written employment agreement must include the following particulars:

• Employee’s name and designation
• Standard working hours (including holidays and leave)
• Minimum remuneration rate
• A record of any other details prescribed by law.

Types of employment contracts 

Under the labor laws of Sri Lanka, various types of employment contracts are used based on the nature of work and the agreement between the employer and the employee. 

Fixed-term employment contracts

• These are for a specific duration, often to fulfill a particular project or cover temporary staffing needs. 
• The contract specifies the start and end dates of employment.

Temporary/Casual employment contracts

• A casual/temporary employee is an individual whom an employer has engaged for tasks of an irregular nature.

Seasonal employment contracts

• It refers to an agreement between the employer and employee during a particular season or time of the year.

Probationary employment contracts

• These are used to assess the suitability of a new employee during a trial period. 

Obligations and rights for both parties

Both employers and employees must adhere to all the rules and regulations mandated by the labor laws of Sri Lanka, including those related to minimum wage requirements, standard working conditions, and termination processes.

Working Hours and Overtime

The Shop and Office Employees (Regulation of Employment and Remuneration) Act outlines provisions related to standard working hours and overtime compensation for employees. 

Regular working hours

• Under the labor law in Sri Lanka, the standard working time is nine hours per day and 45 hours per week. 

Overtime regulations and compensation

• According to the Sri Lanka labor law, the maximum allowable overtime hours in a week is 12 hours.
• Employees are entitled to overtime compensation for working additional hours.
• The compensation rate is one and a half times the average hourly wage rate.

Minimum Wage and Compensation

As per the labor laws of Sri Lanka, employers must pay full-time employees in the country's official currency, the Sri Lankan Rupees (LKR, Rs). Salary payments are typically monthly, and the payroll cycle ends on the last day of each month.

The minimum wage rate in 2024

• As of 2023, the national minimum wage rate is 12,500 LKR per month and 500 LKR per day.

Factors affecting wage determination

Specific criteria do not determine the minimum wage rate. Instead, it is adjusted based on variations in the cost of living index relevant to workers within a particular trade. 

Any increase in the minimum wage rate is reached through mutual agreement among the government, trade union representatives, and employers.

Employee Benefits and Social Security

Some key aspects of employee benefits and social security schemes in Sri Lanka include:

Statutory benefits

Public health insurance

• The National Health Insurance Scheme (NHIS) facilitates public health insurance in Sri Lanka. 
• It covers services such as medication, diagnostic tests, specialist care, and primary care. 

Old-age benefits (provident fund)

• Men are eligible for this benefit at 55, and women can access it at 50, provided they have retired from covered employment. 
• The total contributions made by the employer and the employee, along with dividends and accrued interests, are paid out as a lump sum to the fund member. 
• Fund members can also make early withdrawals from their provident fund for specific purposes. 

Sickness and maternity benefits

• Under sickness benefits, employees are entitled to receive 100% of their regular earnings for seven days per year.
• Maternity benefits are calculated at 100% of the employee’s regular wages and are paid in 12 weeks. 
• It includes two weeks before and ten weeks after the expected date of childbirth.

Work injury benefits

• In the case of temporary disability, employees receive 50% of their average earnings after a three-day waiting period for a maximum duration of five years.
• Employees with a total (100%) disability are entitled to a lump sum payment based on the worker’s wage class.
• For partial disability, individuals receive a lump sum payment ranging from 30% to 100% of the total permanent disability benefit. 

Survivor benefits

• A lump sum payment ranging from 181,665 Sri Lankan Rupees to 550,000 Sri Lankan Rupees is disbursed according to the deceased's monthly earnings. 

Additional perks and benefits

• Family allowances
• Funeral grant
• Dependent’s medical benefits

Social security contributions and requirements

• Both employers (12%) and employees (8%) are required to contribute to the Employees Provident Fund (EPF).
• Employers must contribute 3% of each employee’s monthly salary to the Employees Trust Fund (ETF).
• Employers are also required to provide gratuity payments equivalent to half a month’s salary for every completed year of service if the employee’s tenure exceeds five years at the time of retirement.

Vacations and Paid Time-Off

The Shop and Office Employees (Regulation of Employment and Remuneration) Act clearly outlines regulations related to the paid and unpaid leave policies in Sri Lanka. 

Annual leave entitlement

• According to the labor laws of Sri Lanka, employees become eligible for paid annual leave upon completing one year of continuous service.
• The duration of the initial annual leave during the second year of employment is determined based on the date/month when the employment commenced. 

Public holidays and special leaves

According to the labor law in Sri Lanka, eight designated statutory holidays and an additional 12 holidays are observed for full moon days. 

• Tamil Thai Pongal Day
• Duruthu Full Moon Poya Day
• Independence Day
• Nawam Full Moon Poya Day
• Maha Sivarathri Day
• Medin Full Moon Poya Day
• Good Friday
• Id-Ul-Fitr Day
• The day before Sinhala and Tamil New Year's Day
• Sinhala and Tamil New Year’s Day
• Bak Full Moon Poya Day
• May Day
• Vesak Full Moon Poya Day
• The day following Vesak Full Moon Poya Day
• Id-Ul-Alha
• Poson Full Moon Poya Day
• Esala Full Moon Poya Day
• Nikini Full Moon Poya Day
• Milad-Un-Nabi Day
• Binara Full Moon Poya Day
• Vap Full Moon Poya Day
• Deepavali Festival Day
• II Full Moon Poya Day
• Unduvap Full Moon Poya Day
• Christmas Day

Casual/Sick leave

• Every employee must provide a medical certificate issued by a registered medical practitioner to avail of sick leave. 
• In the initial year of employment, one day of leave is accrued for every two completed months (with half a day of leave accumulated at the end of each month).
• From the second year of employment, individuals are entitled to seven days of sick leave every year.

Maternity leave

• Under the employment laws in Sri Lanka, female employees are entitled to 84 days of paid maternity leave.

Paternity leave

• The Sri Lanka labor law mandates three days of paid paternity leave in the state sector only. 
• The leave must be used within three months of the child’s birth.

Poya holidays

• Poya holidays are designated time off for shop and office employees.
• However, if employees are required to work on a full moon Poya day, they are entitled to receive compensation at a rate of at least one and a half times their regular daily wage.

Termination and Severance

In Sri Lanka, termination procedures and severance pay are regulated by labor laws to ensure fair treatment of the employees. 

Grounds for termination

Some of the common grounds based on which an employer can terminate an employment contract include:

During probation period

• Role misfit
• Poor performance
• Bad behavior
• Persistence absence from work

Due to poor performance

• Unsatisfactory performance
• Employee’s performance threatens the safety of others
• Employee’s performance causes significant disruptions in the employer’s business
• Absent from work due to illness/absconding

Termination with cause

• Gross negligence
• Dishonesty
• Engaging in substance abuse
• Criminal conviction
• Repeated breach of rules
• Serious misconduct
• Absconding
• Physical or mental incapacity
• Failure to comply with regulations

Due to business redundancy

• Layoffs
• Cash crunch
• Closing operations in the region
• Reorganization

Notice period and severance pay

• Employees who have completed one or more years of service are entitled to receive one month’s notice before termination. 
• According to the Payment of Gratuity Act (PGA), when terminating employment, any employer with a staff count of 15 or more must provide a gratuity payment to monthly-paid employees who have served a minimum of five years.
• Gratuity payment equates to half a month’s salary for each year of service.
• For non-monthly paid workers, the gratuity payment amounts to 14 days’ wages for each year of service.
• Severance pay is provided during termination, including situations arising from economic reasons.

Discrimination and Equal Opportunity

The Sri Lankan Constitution ensures that all individuals are entitled to be treated equally under the law and receive fair protection. It also prohibits discrimination based on race, religion, political views, birthplace, language, gender, or caste.

Employers must ensure compliance with the same to avoid any form of legal repercussions.

Prohibitions against workplace discrimination

• It includes the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), the Protection of Women’s Rights Act, and the Employment of Women and Children Act, the principal regulations prohibiting workplace discrimination in Sri Lanka.

Health and Safety Regulations

• The National Occupational Safety and Health Policy primarily governs workplace health and safety regulations in Sri Lanka.

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FAQs

Q1: What is the probationary period in Sri Lanka?

A1: Under the labor law in Sri Lanka, the maximum probationary period is 12 months, while the minimum is six months.

Q2: What is the termination law in Sri Lanka?

A2: Under Sri Lanka's termination law, employers must give one month’s notice to employees who have completed one or more years of service. 

Q3: What are the types of employment contracts in Sri Lanka?

A3: Employment contracts in Sri Lanka can be categorized into four main types: fixed-term employment contracts, seasonal employment contracts, casual/temporary employment contracts, and probationary employment contracts.

Q4: What are the labor laws in Sri Lanka?

A4: Labor laws in Sri Lanka encompass various regulations and legal frameworks that govern employment relationships. These include the Payment of Gratuity Act and the Shop and Office Employees (Regulation of Employment and Remuneration) Act, among others.