Productivity-linked wage increase proposal submitted to trade unions

By Channa Fernandopulle

Tea producer proposals for a wage increase strongly linked to productivity have been submitted to industry trade unions for consideration and are likely to be debated over the coming weeks. 

Speaking yesterday at a media roundtable discussion, Planters Association Chairman Roshan Rajadurai expressed hope that the wage proposals would be received favourably given the numerous difficulties plaguing regional plantation companies (RPC) and Sri Lanka’s tea industry as a whole. 

“We are currently in the midst of negotiations with trade unions and we’ve already had two rounds of discussions and they are now discussing our proposals among themselves and we expect to hold another meeting next week. We can’t disclose the particulars of the proposals but the bottom line is that we cannot afford to give any further wage increases without linking them to productivity,” Rajadurai explained.

Elaborating on the potential for increased productivity to ease pressure on RPC bottom lines, he stated that a 26-minute increase in effective working time – discounting time spent on lunch and tea breaks, travel, and meals – could improve daily output for each worker by approximately two kilograms.  

Linking wages to productivity has been a long-standing request of tea producers, however Rajadurai stated that this year the trade unions too understood that further wage increases could compromise the viability of RPCs. 

“The last time the collective agreements were negotiated, the issue of linking wages to productivity was brought up and while the trade unions were not averse to it, they wanted that discussion to be pushed forward. This time they have a fair expectation that there will be an increase but I think they also understand that this is one of the best deals we can offer them. 

“Unlike before, there has been a sharp downward price movement in tea and rubber as well. Many of our key markets are dependent on oil revenue so their purchasing power has been constrained and I think the trade unions are well aware of all of these factors,” he stated.

Wages and benefits to estate workers comprised 67% of total cost of production in 2014, with estate workers currently being paid a daily wage of Rs. 620, as compared with Rs. 515 in 2011 and 2012 and Rs. 60 in 1992 shortly before lossmaking RPCs of that time were privatised. 

Rajadurai noted that high labour costs and low productivity were peculiar to Sri Lanka when compared with other tea producing nations like Kenya, which pays its workers a daily wage equivalent to Rs. 443.3, South India at Rs. 426 and Assam at Rs. 202.35. 

Conversely, productivity per worker in Sri Lanka is among the lowest in the world at 18 kilograms per worker per day, against 48 kg in Kenya, 38kg in India and 26kg in Assam. 

While mechanisation of production could help improve productivity, Rajadurai stated that options for mechanisation in Sri Lanka were limited by terrain, the lack of tea bushes specially grown for mechanised plucking and the stringent quality required of the Ceylon Tea brand.

Noting that limited mechanisation of plucking had been implemented in some RPCs through the use of purpose-designed shears, he explained how such shears could not be utilised throughout the year since the RPCs were required to provide a minimum amount of employment to workers even in times of lower production. 

Rajadurai went on to caution that RPCs and their parent companies were nearing the limits of what they could absorb in terms of further wage increases given the depressed average sales prices of tea, weak international demand in key markets and the fact that labour costs had consistently exceeded sales prices since 2001.

“Previous governments have generally taken the policy that these issues are between private companies and their employees and therefore they don’t need to get involved but many parent companies are having to borrow money in order to pay wages to the point where banks are refusing to lend because they would become overexposed in the plantation sector. 

“The reputation of Ceylon Tea is built up by the RPCs, we employee a massive portion of the labour force and we provide benefits to their families and we estimate that around one million people are dependent on the RPCs, therefore it is crucial that our issues are not ignored any longer,” Rajadurai asserted.

He noted that despite the Government holding a golden share in RPCs, it had failed to hold meetings and discuss industry issues for the last three years and in that context, welcomed efforts taken by Finance Minister Ravi Karunanayake to hold meet with producers later next week.