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Sri Lanka businesses call for labor law flexibility, deferred EPF in Coronavirus curfews

ECONOMYNEXT – Sri Lanka’s businesses hit by Coronavirus curfews need flexible labor laws to prevent, deferment in Employees Provident Fund to avoid bankruptcies and keep people employed in the longer term, top business leaders told an online forum.

Many businesses have cut salaries and as cash flows were hit with no revenues and difficulties in collecting credit as other firms prioritized salaries.

“If we take the apparel SME sector they are hardly making April and May salaries, but because it is more people intensive, our cost is 60 to 65 percent is salaries it will be difficult to sustain at this situation,” RanilPathirana, Director of Hirdramani, a Colombo-based multi-national apparel group told in an online forum by Echelon Magazine.

Hidaramani has 61, 000 employees in Sri Lanka, Bangladesh, Vietnam and Ethiopia.

“Hirdaramani rarely lets people go, we don’t do that unless we are forced to do so.

“We are seeking the support of the government through associations to give part time, two weeks at work or shifts to protect the people and contribute to economy as well.”

Less demand, less jobs

In Sri Lanka sectors like hotels, which have been badly hit have contract workers. Businesses are also cutting wages with no legal backing but with tacit approval of workers.

The World Bank has estimated that for every million dollars of foregone demand in Sri Lanka’s service businesses there could be 170 fewer people employed.

Dialog Axiata PLC, Group Chief Executive Officer SupunWeerasinghe said deferment in employee pension funds should be considered by the Sri Lankan to help cut costs.

“Employee Provident Fund and Employee Trust Fund can be differed at least for 6 months, that is two fifteen per laborer,”Weerasinghe said.

Vietnam, probably the country that has made most progress against Coronavirus, having contact traced Chinese arrivals aggressively in the Wave I phase in January has already announced a relaxation of its ‘social insurance’, the country’s equivalent of the EPF and ETF.

Singapore, which also does not print money (engage in monetary stimulus) to destroy their currency, real salaries of all people its credit rating, has lifted CPF payments in past crises including the East Asia crisis.

Physical Presence

Softlogic Holdings PLC and Sri Lankan Airlines, Chairman, Ashok Pathirage said the pandemic has made firms manage with less staff than usual, especially at office.

“Working from home is going to be a permanent thing,” he predicted.”This situation has made us realize we don’t need that much of a working force inside our buildings.

“At least 40 percent can stay at home. Sometimes I think we are over staffed.”

Softlogic Group employees around 11,000 whi Sri Lanka AirLines have 7,500 employees.

Pathirage said SL airlines and Softlogic companies have taken measures for salary cuts in order to survive in the long term.

“We have also taken measures for salary cuts because we know it is not going to be over in three months” Pathirage said.

“You need to be strict in your cost cutting measures and you need to run with a bare minimum.It gives us benefits as well, such as transportation and electricity will be less.”

Access Engineering, Managing Director, Christopher Joshua said the labor component is the biggest part of any industry.

Access Engineering have 14,000 direct and indirect employees currently working on projects.

He said in construction there were jobs but it had to import people from abroad as many Sri Lankans no longer wanted to work in the sector. There had been a proposal to create a state-backed labor pool, from which people could be hired whenever needed.

Construction jobs are temporary and many do not want to work in it.

“I think Sri Lanka should have labor law flexibility because it is the fundamental part of our cost structure, you just got to have a greater flexibility there,” Hemas Holdings Chief Executive Officer Steven Enderby said.

The effects of the virus on some foreign countries could be a sign of things to come.

“I think what we have seen so far is the operational shock wave and a health shock, but the economic shock wave is yet to come,” Enderby said.

“In Europe and other parts we heard that in the mid of March there was a 5 million loss of jobs, but the real numbers are more terrified than that.” (Colombo/May02/2020)