Govt. mulling labour, insurance law changes

• Minister planning legal changes to promote compensation, make employee insurance mandatory 
• Says insurance industry modalities also need to change 
• Wants court process to obtain compensation to be simplified 
• Proposes ‘no questions asked’ compensation packages in cases of serious injury 
• Backs setting up a fund for unemployment insurance 
• Believes COVID-19 impact would have been less if steps taken sooner
• Discussions with ILO and other stakeholders to take changes forward 

By Uditha Jayasinghe 

The Government is planning sweeping changes to Sri Lanka’s labour laws, including changing regulations governing the insurance industry and worker compensation, as well as introducing formal income protection and mandatory injury insurance for employees, a top official said.

Labour Minister Nimal Siripala de Silva, speaking at an event to award scholarships under the Ministry’s ‘Shrama Vasana’ scheme this week, noted that injury protection given to workers remained minimal and required a major overhaul, especially given the impact COVID-19 has had on large segments of the economy. 

“We have large companies, including insurance companies, that make massive profits but they don’t do quite as well when it comes to looking at worker issues from a social responsibility perspective. We must change this. Compensation cases can take years to be resolved and the reality is that companies don’t like to make payments. We should have a process that is simpler and will support workers. Ideally there should be ‘no questions asked’ compensation payments in instances of serious physical injury,” he said. 



Minister de Silva noted the insurance industry should change to provide better services to workers who have faced work place accidents and provide new measures and products to improve protection of vulnerable employees. He also opined workplace insurance should be made mandatory for all employees and a special fund should be set up to promote income protection. 

“If Sri Lanka had a proper unemployment insurance system that covered most of our workers there would have been less economic devastation caused by the COVID-19 pandemic. People would have had something to fall back on and they would be better supported. These are the kind of new measures we plan to focus on.”

The Minister said steps will be taken to begin discussions with the International Labour Organisation (ILO), unions, think tanks and other stakeholders to formulate new policies to better support local workers. He also stated that the current Factories Ordinance, which was introduced in 1942 and last amended in 2002, was not comprehensive and wide-ranging enough to protect workers sufficiently, especially at the provincial level, where reporting of workplace accidents and legal support is estimated to be weaker.

The ILO estimates that approximately 2.2 million people die every year from occupational accidents and diseases, while some 270 million suffer serious non-fatal injuries and another 160 million fall ill for shorter or longer periods from work-related causes. The total cost of such accidents and ill health have been estimated at 4% of the world’s gross domestic product. In Sri Lanka, about 4,000 accidents are being reported yearly and the number of working days lost due to accidents is estimated to be around 600,000 workdays every year. 

In Sri Lanka, considerations on occupational safety and health (OSH) was confined to mines and to the relevant machinery since year 1896 till 1950, and extended only to factories under the Factories Ordinance. The shortcomings in relation to occupational safety and health coverage in the formal sector is a key concern, as only about 30% of the labour force is covered by the main statutory provision on OSH. 

Institute of Policy Studies (IPS) Research Economist on Labour, Employment and Human Resource Development Priyanka Jayawardena, presenting a research paper last September, proposed the Government shift to income protection rather than job protection, pointing out more than 1.7 million temporary workers in the private sector were at risk of losing their jobs or suffer wage cuts due to COVID-19. 

She argued the Government could facilitate permanent employment in the private sector by introducing strategic protective measures to safeguard workers’ rights and benefits, such as unemployment insurance and universal pension schemes. 

In Sri Lanka, it is difficult to lay off workers as the country has the highest severance pay in the world for redundancy dismissal. Excessively restrictive legislation discourages formal job creation and fail to provide real protection, as employers find loopholes and ways around the rules, the paper added.