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Voluntary retirement schemes, ‘lay-off’ and outsourcing

It is an undisputed fact that the global economic and financial crisis is causing havoc, distress and untold pain to corporate bodies, individuals and families in general.

In Sri Lanka, according to the Commissioner General of Labour M. J. L.U. Wijeweera, so far 32,000 domestic jobs have been lost. While the unions maintain the figure is around 70,000 the official figure of 32,000 had been gauged from terminations that have gone through, but it has been accepted that a large number of terminations have taken place without the involvement of the Department of Labour.

It has also been revealed that the number of applications to terminate employment is increasing. News items of companies standing to lay off staff similar to “Dialog Telecom to save 500 million by shedding staff” appear in the newspapers with monotonous regularity.

The International Labour Organisation (ILO) has issued new labour market projections for 2009, showing a further increase in unemployment, working poor and those in vulnerable employment.
In presenting the new data, ILO Director General Juan Somalia said that the ILO’s Annual International Labour Conference to be held in Geneva from June 3 to19, was to consider an emergency “global jobs pact” designed to promote a coordinated policy in response to the global jobs crisis.

Sense of insecurity

Some enterprises are attempting to use the economic crisis to “lay-off” staff with a view to ‘outsource’ its core and ancillary functions. While various reasons are given by manufacturers for outsourcing, it is an undisputed fact that with outsourcing of human resources, the rights and privileges of the workers are gradually eroded as well as those in permanent employment run the risk of losing their employment. There is a growing concern of security of employment, the growing fear of their functions been ‘outsourced’.


Outsourcing is the transfer or delegation to an external service provider, the operation and day-to-day management of business process. It is the general belief that outsourcing gives greater efficiency to the main organisation, and helps the organisation to achieve economies of scale with outside service providers.

Outsourcing of labour takes place where employees of another entity (contract) are hired to carry out particular functions in a company. Outsourcing is not an illegal mechanism and is indeed recognised by law.
But by subtle and insidious way, manpower suppliers underpay and deprive employees of certain basic privileges and benefits.
The Daily Mirror of June 6, 2009, reported of a manpower supplier defrauding EPF and ETF contributions amounting to Rs. 6 million and such cases are many.

While various reasons are given by manufacturers and business enterprises for outsourcing their business functions, the primary considerations are the cost factor and the concern for uninterrupted business operations without being affected by industrial unrest.

It has been found in many enterprises that subsequent to “lay-offs” termination of services of permanent employees, by voluntary retirement schemes etc., they “outsource” the operational function.
There are insidious ways to circumvent the provisions in the Terminations of Employment (Special Provisions Act No 45 of 1971).


Globalisation that overran the world during the last three decades and the current economic crisis have created new forms of employment, such as outsourcing, subcontracting and casualisation while permanent employees have been adversely affected. It is accepted without dispute that it is the need to be competitive in the open market that has resulted in the new forms of employment said above.

These arrangements are preferred by manufacturers as they are cost effective and help them to effect speedy deliveries of quality goods to consumers without interruption of industrial operations by industrial unrest. Globalisation has made it essential that if an industry is to survive or still to make profit, its products and services should be of all active, of quality and available at an affordable and satisfactory price and in time.

Small and medium sized companies are today substituting for big industries, particularly to the extent that production processes have developed from mass production to services, tailored to consumer demand and taste, with zero margins of error and prompt deliveries. Today, we find multi-national blue chip and even indigenous business establishments, shedding their excess weight and outsourcing part of their production. You also find software dealers in India processing data and coding text for banks in the West. Thousands of call centre jobs have been created in India, and software and service exports are expected to earn about Rs. 40 billion (US$19.9bn) in the year up to December 2009. Thus the demand for outsourcing remains strong.

Employer-employee relationship

It is quite important that an organisation resorting to outsourcing ensure that both parties are benefitted through it, more importantly that the outsource personnel are not deprived of their basic rights and privileges.

Organisations which promote outsourcing need to understand the need for knowledge sharing with the supplier and encouraging the suppliers to be part of the programme. This helps both parties to understand the requirements and work together by devising a contract of employment by which two or more persons regulate their relationship recognised legally.

There are those outsourcing arrangements whereby a part of a business operation is outsourcing entirely to another person or company, which has expertise to carry out the particular function. Also, companies may outsource ancillary functions such as janitorial work, security, and transport to outsiders. These functions are not “core businesses” of the company. This type of arrangement is less likely to give rise to an assumption of an employer-employee relationship, although the fundamental principle referred to above should be adhered to.

Wages Board and employee protection

The provisions in the Wages Board Ordinance provide adequate safeguards for the “outsourced” as well as for the permanent employees. In this context, where core business of a company is being outsourced, additional care must be taken to ensure that no contract of employment in imputed to the company as it would be much more difficult to prove that outsourcing is a “subcontracting”.

Section 59A of the WBO imposes restrictions on an employer’s rights to execute work through an independent contractor or subcontractor in the following manner.
Further, Section 45A provides that where a person (contractor) has undertaken to execute any work enters into a contract with any other person (subcontractor) for the execution of the subcontractor of whole of part of that work, then if the subcontractor fails to pay wages to any worker employed by him in the performance of that contract, the contractor shall be liable to pay the wages due to that worker.

Erosion of worker rights

The statutory regulations which regulate the reciprocal obligations of the employer and service providers (outsourcing agencies) are quite adequate. While there are safeguards to ensure that employers are not exploited, it is however, in the implementation of the contractual obligations that the manpower agencies subtly deprive the workers of certain privileges and tend to underpay its employees.

While various reasons are adduced for outsourcing certain business functions both core and ancillary, the main considerations are the cost factor and desire to ensure uninterrupted business activity without industrial disputes. Certain establishments confronted with industrial disputes due to the persistent intransigent attitude of the trade unions have subtly resorted to “Voluntary Retirement Schemes” to layoff their staff on the permanent cadre. Having successfully launched Voluntary Retirement Schemes they have subsequently outsourced the certain functions. Despite the stringent labour regulations of “laying-off” staff and mandatory compensation, many multi-national companies circumvent these regulations by insidious ways. Regrettably trade unions have so far failed to make any meaningful and tangible effort to combat the adverse effect of it.


While the economic recession and its impact on business enterprises are appreciated and consequently the need to restructure of operations is a necessity, however, the remedial action should not be detrimental to the employees. While the need to “lay-off” excess staff may be unavoidable, in pursuing the termination of services, it must not be with the objective of outsourcing the core and ancillary functions. While the Labour Department has enacted laws and regulations to ensure unjust and illegal termination of employment, with Industrial Dispute Act of 1950 and Termination of Employment (Special Provisions) Act No. 45 of 1971 some employers circumvent the provisions by insidious ways.

While many multi-national companies circumvent these regulations by insidious ways, regrettably trade unions have so far failed to make any meaningful and tangible effort to combat. The insidious methods used by some enterprises to terminate the services of the employee on the permanent cadre essential with a view to “outsource” the core and ancillary business operations naturally the growing apprehension among employees of insecurity of employment.

Reasons for outsourcing

One of the main factors of outsourcing being the cost factor, manufacturers endeavour to obtain the services at competitive rates, in the process the employees are deprived of certain benefits than their counterparts in the permanent cadre enjoy while performing the same type of work. While this is blatant discrimination, it has also had an adverse effect on moral. Naturally the degree of commitment and dedication to duty is relatively low further, outsourcing endangers job.

It is relevant to examine how new of work arrangements, outsourcing, contracting and actualisation provide for from security of employment. The main beneficiaries of “outsourcing” are the manpower suppliers or service providers. No wonder that during the last two decades there has been a proliferation of manpower agencies. They are pursuing a lucrative business unabated depriving its employees of some of the basic rights. The fact that “outsourcing is causing much anxiety to employees in respect of their security of employment it is also gradually eroding the basic rights and privileges of outsourced personnel cannot be disputed. It is timely that the Department of Labour makes an analytical survey of the various multi-national business institutions that have outsourced their care and ancillary functions and ascertain whether consequent to application for termination of services of those on the permanent cadre under the provisions of the termination of Employment (Special Provisions Act No 45 1971), whether the vacancies are filled with “outsourced” staff, the payments and privileges to “outsourcing” staff are in accordance with the statutory provisions, and check on the escalating number of violations.
It is timely that the Department of Labour look into these particular aspects.

Sqn. Lrd. J. T. Rex Fernando
(SLAF Retd)



 Hillary Costa  

Committed Teacher of our time retires

We cherish our A/L first-year class in 1984 with teacherHillary Costa who had by then just served around two years at St. Benedict’s College, Kotahena.

This teachers had got through his A/Ls in the Commerce stream in 1976, in the first batch to follow Commerce and Accounts at A/Ls at St Mary’s College, Chilaw. Hillary Costa had gained admission to the Peradeniya University in 1978 and passed out in 1981 with a Bachelor of Commerce, Special Degree. In 1990, he earned a Post Graduate Diploma in Education and in 1996 successfully obtained a Diploma in Master of Education, both from the University of Colombo.

No sooner he passed out from the university, he joined the tutorial staff of St. Mary’s College, Chilaw on temporary basis. He served at St. Mary’s until April 1982 where he won College Colours for his dedication and commitment to help weak students gain successful results at the O/L classes.

In May 1982, he joined the tutorial staff of St. Benedict’s College, Kotahena and we were privileged to have our A/L education in the Commerce stream under him. He was young and strict and committed to impart his knowledge and experience to us in the simplest method of professional teaching which moulded us into honourable citizens. An exceptional character of this teacher was that he never allowed any weak student to fall out. He got round all students and we all passed the A/Ls successfully.

We are very grateful to him for patiently nurturing us to become the successful citizens we are today. He not only wanted us to follow the syllabus, but at the same time groomed us with leadership qualities. Based on his idea, we, the boys of 1986 A/L class at St. Benedict’s College, Kotahena formed the Bens 86th Batch with the motto ‘Stand We Together’.

This excellent educationist after long years of professional teaching of 27 years, has now retired since April 2009 from our great school. Even after his retirement we understand he has initiated a ‘Retired Teachers’ Welfare Society’ of St. Benedict’s College, Kotahena.

The Bens 86 Batch has readily rallied round this great Master to help him in whatever possible way to accomplish his endeavours. We quote his home address: No. 2/144, Alwis Town, Hendala, Wattala and Contact No. 0112930935, so that any interested Old Boy or retired teacher could get in touch with him to harness his great idea of fostering the welfare of retired teachers.
May God Almighty bless him with good health and long life!
Bens 86 Batch



Justice Mark Fernando

Justice Mark Fernando
Who passed away recently
Was a Marked Fernando
When he was on the bench
He made a mark
In the Judiciary
And in the country
And will be remembered
As a martyr
For the ease of independence
Of the Judiciary



B.M.H.S. Bulathsinhala

Mr. Bulathsinhala, a leading figure in Pannipitiya area passed away recently. He conducted English and other classes at Pannipitiya YMBA for a long period. As a leading member of Pannipitiya YMBA he rendered a great service.
In fact, he was a very kind-hearted person and he lived in such a way. I had never seen him in the angry mood. He came from Kurunegala area and later on he settled down at Godagama as he built a home there. He served as the honorary Treasurer of YMBA Pannipitiya.

Mr. Bulathsinhala is no more with us
But we are unable to forget him early
This is the situation in Sansaragamana,
May be attain the supreme bliss of Nibbana,
M. G. Asoka Karunaratne


Dengue scourge

The Ministry for Health and Nutrition is placing the onus for the eradication and suppression of the dengue mosquito squarely on the shoulders of the public. Indictments and fines are ill advised in the control of the affliction. The public being burdened with the eclipse and petering out of the mosquito menace is repudiation and neglect of the duties of men who are paid to keep the country free of disease. It is also a lackadaisical, sluggish, disinterest evinced by the Ministry.

Sri Lanka has an Industrial Technology Institute. The Agricultural Department, the Tea, Rubber and Coconut Research Units and the Health Ministry too, surely employ entomologists and related scientists who could research into the problem of quelling the mosquito population. Compelling people to peer into flower pots, dustbins, dirt heaps, rainwater gutters, sewers is a manpower waste which should be shunned. In this modern age of science, a less time consuming plan should be formulated.

Cuba, some years ago researched into eradicating the menace which is a curse and an anathema to man and animal generally around the world. They sought to keep down breeding by sterilising the male and intercepting the breeding cycle to reduce the proliferation of the fly. How far they succeeded could be ascertained from the Cuban Embassy here in Sri Lanka. If further research is necessary, both countries could engage in it. That approach is most advisable for if breeding could be checked it would be a boon and godsend to the world.

Ivor Samarasinghe








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