1. The above Act was passed in Parliament on Friday, 11 th March 2016. It will become law after it is duly certified by the Hon. Speaker. Copies of the Act, as passed by Parliament, are yet not available. A fresh circular will be sent to members sometime next week confirming its provisions and how they should be applied. Members are advised to await that circular before taking steps to pay this allowance. 2. In the meantime, we thought of placing the following explanatory notes for the benefit of members, based on the bill that was presented to Parliament. We have also taken into account the changes that had been made at the committee stage last week, which have been made available to us by the Labour authorities. The fundamental features are as follows; a) The provisions of this Act will come into operation retrospectively with effect from 1 st May 2015. b) For the purpose of this Act, the Commissioner General of Labour has been cited as the Competent Authority. c) Workers who are covered in terms of the provisions set out in sections 3 (1) and 3 (2) and who are in receipt of a monthly wages or salary of less than Rs 40,000/- per mensem will be entitled to an allowance of; 1. Rs 1,500/- per mensem with effect from 1 st May 2015, and 2. Rs 1,000/- per mensem with effect from 1 st January 2016. 1 / 8
As such, to determine eligibility for the allowance, a worker will have to; a. fall into the category of workers referred to in sections 3 (1) & 3 (2), b. draw wage or salary of less than Rs.40, 000/- and c. be in employment on the date on which this Law was passed. For example, workers who left employment/ retired from service prior to the 11 th of March 2016 though they may fulfil the other two criteria, are not eligible to receive the allowance. Those who do not fall into the category of workers referred to in section 3(1) [and referred to specifically in section 3(2)] shall not be eligible to receive the allowance. For example, newly recruited workers. Similarly, workers who are exempted, as set out in item 4 of this circular shall not be eligible to receive the budgetary relief allowance. d) In the case of workers who are paid a daily rate, the allowance payable shall be; 1. a sum of Rs 60/- per day subject to a maximum allowance of Rs 1500/- in respect of a month with effect from 1 st May 2015, AND 2. a sum of 40/- per day subject to a maximum allowance of Rs 1000/- in respect of a month with effect from 1 st January 2016, and 2 / 8
e) In the case of a worker who is employed on a piece rate basis, the allowance payable in respect of a month shall be not less than 1. 15% of the wages or salary payable to such worker for that month, subject to the total allowance payable not exceeding Rs 1,500/- with effect from May 2015, AND 2. 10% of the wages or salary payable to such worker for that month, subject to the total allowance payable not exceeding Rs 1,000/- with effect from January 2016 f) A worker whose wages or salary for a month exceeds Rs 40,000/-, but does not exceed Rs 41,500/-, shall be entitled to a monthly allowance of an amount equal to the difference between Rs 41,500/- and the amount drawn by such worker as wages or salary for that month. E.g., an employee who is in receipt of a salary of Rs 40,500/- per mensem will be entitled to an allowance of Rs 1000/- per mensem. g) The allowance will have to be recorded and shown separately in a register maintained for this purpose. In fact, showing it separately in the pay slip and keeping a copy of it would suffice. h) The allowance shall constitute part of a worker s salary for all consequential benefits set out below; i. EPF/ETF remuneration ii. Annual holiday 3 / 8
iii. Overtime remuneration iv. Maternity Benefits payments v. Gratuity i) Any arrears of the allowance will have to be paid in full to workers eligible to receive the allowance (i.e. as the provisions of the Act is to apply retrospectively). 3. Credit for wage increases granted since October 2014 a. Though outside of the operational period, an employer who has granted a wage or salary increase to employees between the period 1 st October 2014 and 30 th April 2015 will be entitled to take credit for such wage or salary increase in determining the allowance payable under this Act. Notes for consideration: Similarly, we expect employers who have granted a wage or salary increase to employees between the periods 1 st May 2015 up to 1 st January 2016 based on the recommendation made by the government to be entitled to take credit for such increase in determining the allowance payable under this Act. In as much as the bill has not expressly provided for exemption, we have been made to understand that the Commissioner General of Labour is likely to consider granting relief to employers on the basis of equity. 4 / 8
As you know, the EFC has constantly made representations on this matter as it would be inequitable not to exempt employers who have complied with the government s request by granting salary increases during the relevant period. b. Another issue that requires clarification is the definition of a wage or salary increase as set out in section 3 (10). The present definition appears to be out of context to say the least as the Act is to apply retrospectively and does not capture the situation of employers who have given a wage or salary increase based on the government s recommendation during the period 1 st May 2015 to 1 st January 2016. Hence, we will be seeking a clarification in this regard. Notes for consideration: The ambiguity caused on account of the attempt made to distinguish between annual or periodical increment given to a worker.. from what the authorities deem to be.any increase of wages or salary connected to budgetary relief allowance under this Act, will have to be clarified. Apart from not connoting any substance - when one considers processes followed in the private sector, the nexus referred to is inaccurate when one considers that the legislation has been implemented retrospectively. In short, no employer could have ever envisaged the provisions of this Act at the time of granting increases referred to therein; certainly not anything related to budgetary allowance or the likes of it. 4. Exemptions Any worker who is covered by; 5 / 8
(a) A Collective Agreement in force on the date of operation and which contains provisions relating to increase of wages, OR (b) A Collective Agreement that has been extended under section 10 of the Industrial Disputes Act shall not be entitled to this allowance. In addition, workers employed in any charitable institution within the meaning of the Inland Revenue Act No 10 of 2006 as well as by any religious institution maintained for, or connected with worship shall be exempted. 5. The Minister of Labour and Trade Union Relations is permitted under this Act to defer the grant of this allowance in respect of any trade, taking into consideration the relevant economic conditions prevailing in such trade in consultation with the Ministers in charge of the subjects of Industry and Economic Affairs, respectively. The deferment shall not extend beyond a period of twelve months from the day of making such order. 6. The terms worker, employer and wages or salary, inter alia, have been defined as follows in the Bill. Worker worker means, any person who has entered into or works under a contract with an employer in any capacity, whether the contract is expressed or implied, oral or in writing and whether it is a contract of service or of apprenticeship excluding a contract of apprenticeship under the Tertiary and Vocational Education Act No. 20 of 1990 and the Employment of Trainees (Private Sector) Act No. 8 of 1978 or a contract personally to execute any work or labour and includes any 6 / 8
person ordinarily employed under any such contract whether such person is or is not in employment at any particular time and includes any person whose services have been terminated but does not include a domestic servant. Employer Employer means any person who employs or on whose behalf any other person employs, any worker and includes a body of employers (whether such body is a firm, company, local authority or trade union), and any person who on behalf of any other person employs any worker including a competent authority of a business undertaking vested in the Government under any written law, the legal heir, successor in law, executor or administrator and liquidator of a company and in the case of an unincorporated body the president or secretary of such body, and in the case of a partnership the managing partner or manager. Wages or Salary (a) The contractual wage or salary of the worker or the wage prescribed under the Wages Boards Ordinance (Chapter 136) for the industry or service to which the worker belongs, and (b) Wages or basic salary together with the cost of living allowance, special living allowance or any other similar allowance; Notes for consideration: 1. The EFC will be making further representations to the Commissioner General of Labour not to consider bringing apprentices within the meaning of a worker as done previously when 7 / 8
ad hoc legislation of this type were implemented in the past. Besides, they are a class learners and will not come within the category of those employed by an employer to perform work. As you know contracts offered to apprentices are distinct from those offered to employees. 2. As you may have noted, the issue of accounting for past budgetary allowances has not been dealt with in terms of the provisions of this Act. In fact, we intend to make representations that such allowances be deemed as part of wage or salary considering them be coming within the ambit of what has been described as any other similar allowances as set out above. Members are advised to await next week s circular (and any further advice with regard to the clarifications sought ) prior to implementing the provisions of this Law. W.M.K.L.Weersinghe Director General 8 / 8