RPCs put the ball in trade unions’court

Rs. 1,000 minimum daily wage demand

During a meeting last Friday between Minster of Labour Nimal Siripala de Silva and Chairmen of all Sri Lankan Regional Plantation Companies (RPCs), a final proposal was submitted towards ensuring a ‘sustainable’ earnings model for tea estate workers, making it the trade unions’ responsibility to take the next action on the long-standing pain point of the industry.

This proposal takes into consideration the sustainability of both the industry and livelihoods of plantation workers, RPCs said.

“After a very productive meeting with the minister, RPCs have arrived at a final consensus on what we can sustainably offer, while providing the highest possible earnings potential for our workers. Our final offer amounts to a 30% increase in earnings on the fixed model, and there is no upper limit to what workers can earn under the productivity-linked components. This is the first step to modernising our entire industry, and moving beyond a basic daily wage system which is a relic of the colonial era and long overdue for an update,” they said.

“We have gone well beyond the Rs. 1,000 daily wage demand of Trade Unions, and this follows a 40% increase from just two years ago. At a time when others in the apparel and leisure sector are slashing wages and retrenching workers, ours is one of the precious few export industries which has shielded our employees from the negative impacts of the pandemic, and is actively pursuing a wage increase. This is no easy feat, and without improvements in productivity, it will still be extremely difficult for any RPC to remain financially sustainable. There is clear understanding from the government on our position, and it is now up to Trade Unions to make the right decision,” Chairman, Plantation Services Group, Employers’ Federation of Ceylon said.

Under the final proposal, RPCs are offering a fixed daily wage of Rs. 1,105, with the re-introduction of attendance and productivity incentives – a feature which Trade Unions had strongly and consistently opposed in the past, but have since reversed their position in the most recent negotiations.

The breakdown is as follows: Basic Wage – Rs. 700, EPF/ETF – Rs. 105, Attendance Incentive – Rs. 150 and Productivity Incentive – Rs. 150. Under the new proposal, workers will receive a substantial Rs. 6,250 increase to their monthly earnings.

Further to the revised daily wage model, RPCs also propose the implementation of productivity-linked earning components to ensure that workers are finally provided effective incentives and are rewarded for increasing their productivity.

The proposed fixed daily wage model will be implemented 3 days a week, and on the remaining days, RPCs have called for one of two productivity-based models to be implemented based on how suitable they would be to each RPC’s unique capacity – enabling workers to earn far more than the fixed Rs. 1,105.

Under the productivity-linked component, employees can earn Rs. 50 (inclusive of EPF/ETF) for every kilo of tea leaf plucked. In the case of Rubber, this would amount to Rs. 125 (inclusive of EPF/ETF) for every kilo of rubber latex.

Alternatively, employees will be remunerated based on a revenue share model, offering greater earnings, similar to what has long been practiced with success in the smallholder sector in Sri Lanka. Companies who do not wish to continue with either of these models, will reserve the right (at their sole discretion), to continue with the standard daily wage system.

Currently, the Cost of Production (COP) of tea amounts to Rs. 615 a day, higher than any other tea producing nation in the world. Out of this, cost of labour accounts for 63% of the total cost of production. With the proposed increase in daily earnings to Rs. 1,105, the COP will increase up to Rs. 730 a day. Unfortunately, increasing cost of production is expected to be met with stagnant prices in local and international markets, further annihilating the economic viability of the industry.

Previously, the auction price of RPC tea reached an all-time high of Rs. 601 per kg on average (USD 3.99) in 2017 and has since plunged to Rs. 581/kg (USD 3.16). However, Sri Lanka’s global market price for tea has become increasingly uncompetitive, especially in comparison to USD 1.94 for tea at the Mombasa auction in Kenya. Competitors like Kenya have seen a significant increase – as much as 50% – in crop output which has resulted in an oversupply in the global tea market, forcing the market price of tea to reduce further.