CBSL salary increase: Charting a path forward for Sri Lanka

By Lalin I De Silva

The recent decision by the Central Bank of Sri Lanka to increase the salaries of bank employees has ignited a storm of controversy, drawing sharp criticism from both the public and the Parliament. The move, which granted the Central Bank self-regulation rights unprecedented in other state sector organizations, has raised concerns about accountability and transparency within the country’s financial institutions.

At the heart of the matter lies the absence of a National Pay Policy, a critical deficiency in Sri Lanka’s state policies. Unlike countries such as the United States, which have established platforms like www.O’net.org to address similar issues, Sri Lanka lacks a comprehensive framework to ensure fair and equitable compensation across its public sector.

The dearth of Human Resources Management (HRM) concepts in state administration exacerbates the problem. While the Treasury’s management division has outlined recruitment guidelines, these remain vague and non-binding, contributing to growing frustrations and hindering the country’s development. With approximately 8 million employees under its purview, Sri Lanka’s management of human resources lags far behind international standards.

Wages, salaries, and rewards collectively constitute the total compensation package that an employee receives for their work. Each component serves a distinct purpose and is typically defined as follows:

Wages: Wages typically refer to the hourly rate or payment based on the number of hours worked by an employee. It is commonly associated with jobs that are paid on an hourly basis, especially in industries such as retail, hospitality, or manufacturing. Wages are often subject to minimum wage laws set by governments and may vary based on factors such as overtime, shift differentials, and bonuses tied to performance. Hourly rates are yet to be regularized in the Sri Lankan context.

Salaries: Salaries are fixed payments made to employees on a regular basis, typically on a monthly or annual schedule, regardless of the number of hours worked. This form of compensation is commonly associated with professional or managerial positions and is often negotiated as part of an overall employment contract. Salaries are usually based on factors such as job responsibilities, experience, education, and market demand for specific skills.

Rewards: Rewards encompass various forms of additional compensation beyond base wages or salaries, designed to recognise and incentivize employee performance, loyalty, or contribution to organisational goals. This can include bonuses, commissions, profit-sharing, stock options, employee benefits (such as healthcare, retirement plans, and paid time off), recognition programs, and other non-monetary incentives like career development opportunities or flexible work arrangements. Most employees in the state sector are still to gain from total rewards concept. The state sector employees are purposely kept away from ‘high performance-oriented reward structure” and blame them often for ‘inefficiency’. Is it fair?

“It is a widely recognised fact that salaried employees typically utilize only 30% of their total capacity for performance, leaving a significant 70% untapped potential, which must be unlocked through effective employee motivation strategies. This approach mirrors the practices adopted by developed countries.”

The total compensation package combines these elements to provide a comprehensive and competitive remuneration structure that attracts and retains talent, motivates employees to perform at their best, and aligns with the organisation’s strategic objectives. It is important for employers to carefully design and communicate their compensation packages to ensure fairness, transparency, and compliance with legal and regulatory requirements, while also fostering a positive workplace culture and employee engagement.

Calls for immediate action to rectify this situation have grown louder, with demands for the establishment of a dedicated National HRM Ministry gaining traction. Critics argue that Sri Lanka’s outdated education system is partly to blame, highlighting the need to incorporate modern HRM practices into the national curriculum.

Key components necessary for the establishment of fair salaries include a national job list encompassing all sectors and districts, as well as the development of a national skill inventory. These initiatives could be seamlessly integrated with the education system, ensuring that certifications are awarded based on competency-based assessments.

Before solely blaming the Governor of the Central Bank, Sri Lanka must prioritise the creation of a dedicated ministry for HRM. Such a measure would pave the way for the formulation of a comprehensive National Pay Policy, crucial for the country’s economic stability, particularly in light of its increasing reliance on foreign employment income.

“In conclusion, the outcry sparked by the unilateral salary increase underscores the critical need for holistic reforms within Sri Lanka’s public sector. Establishing a dedicated Ministry of Human Resources Management and implementing a National Pay Policy are imperative steps towards addressing longstanding issues of fairness and transparency in workforce management. As the renowned quote suggests, ‘The right people drive business,’ emphasising the importance of studying and understanding the pivotal role of human resources in organisational success.”

(The writer is former senior planter, agricultural adviser/consultant, Secretary General, Ceylon Planters’ Society, Editor, CPS Bulletin & freelance journalist.)