Estate workers in Sri Lanka begin wage talks, amidst high commodity prices

Sept 18 (LBO) – High commodity prices could up the bargaining power of plantation worker unions, as talks with plantation companies to raise wages, begin next week.

Trade unions representing 260,000 workers in plantation companies who are re-negotiating a 2-year collective agreement say they will factor in high prices companies enjoyed this year for tea and rubber.

“We are going for talks next week under our collective agreement, which will be negotiated based on a formula, but the increasing price of commodities in the market will be a key issue taken up,” M Sivalingam, Deputy Minster of Estate Infrastructure and financial secretary of the Ceylon Workers Congress, told LBO.

The Ceylon Workers Congress is the largest estate worker trade union, representing about 250,000 estate workers on privately held plantations owned by 22 companies, with smaller unions representing the balance.

Rubber prices reached record levels of 390 rupees a kilo as at end May from 155 rupee levels at the beginning of the year, due to global supply shortages and increased demand from China.

Plantation companies with a high exposure to rubber, posted high earnings for the quarter ended June, though rubber prices have since slipped to 222 rupee a kilo levels in September.

With a drought in top producer Kenya, tea prices for Sri Lanka’s high grown elevation teas did well, reaching 214.46 rupees a kilo prices in August over 161 rupees in the same month last year.

“Workers are likely to demand a steep increase because commodity prices are high and companies with high exposure to rubber recorded their best ever quarter as at end June,” Channa Amaratunga, Chief Investment Officer for Boston Asset Management, told LBO.

“But the danger in that is, companies may be able to afford it (a wage increase) now, but it is difficult to say what will happen with commodity prices in the next 12 months.”

Wages are to be set for the next two years for workers on the island’s tea, rubber and coconut estates, under a collective agreement with plantation companies.

On average, tea estate workers earn a daily wage of 190 rupees. The fixed base rate is 135 rupees, with a guaranteed price share supplement of 20 rupees tagged on.

Estate employees also get a daily attendance incentive of 25 rupees if attendance is over 75 percent of the required 25 days a month. Workers also get a variable price share supplement pegged to the national sales average, which works out to about ten rupees.

Rubber estate workers get a flat wage of 125 rupees, with a guaranteed price share of ten rupees, an attendance incentive of 35 rupees and a variable price share supplement pegged to sales averages – totalling up to an average of 190 rupees a month.

“Both parties are conscious of the need for revision of wages, but we are equally conscious of the need to ensure sustainability of the plantation industry,” Gotabaya Dassanayake, Director General of the Employers Federation of Ceylon, said.

Companies with a bigger exposure to tea may be hurt more, Amaratunga says, as has been the case in previous rounds of wage increases.

“The question is, will commodity prices keep on rising? Wages are the biggest component of plantation company costs followed by fertiliser prices.”

Companies have been trying to link wages to productivity, instead of just attendance bonuses, with the issue likely to come up again in next week’s talks.

“If wage talks were tied to yield increases per hectare or something on those lines, it would be more beneficial,” Amaratunga said.

Wage talks in previous years have sparked off turmoil on estates, with trade union strikes and work stoppages, by unions demanding a better deal off plantation companies.

The first round of talks will begin on September 28.