Sri Lanka pensions, retirement age and lawmaking
08 Jun, 2011
June 08, 2011 (LBO) - Much has been written about the advantages and disadvantages of the proposed Employment Pension Benefits Fund.
While I will not deal with the specific proposals of the Bill that has now been temporarily suspended by the government, it is of paramount importance to understand the compulsions and consequences that led to the proposed bill in the event the bill is presented to Parliament in another disguise.
The Overseas Employees Pension Benefit Fund is also saddled with similar disadvantages and needs to be withdrawn before it raises unrest amongst the diaspora workers.
The most favourable interpretation that could be given for the government to hastily introduce a pension bill was to gain a huge political advantage on Workers Day on May 1st 2011. Pensions are naturally welcome by employees who work 25 – 35 years and want to financially secure their retirement.
Today the employees’ retirement life could be longer than the employees’ working life. Average life expectancy in Sri Lanka now exceeds 75 years, putting it ahead of 140 other countries in the world. The concern to secure that retirement future is legitimate and the Government needs to work with all stakeholders in shaping that future.
A pension is only one of the possible ranges of solutions. A pension scheme such as the one proposed is detrimental to the interest of workers. It was badly drafted and one suspects did not go through the rigour of a professional Legal Draftsman Department.
The Space for Discussion and Debate
The bill was to affect the lives of the majority of Sri Lankans. First a white paper should have made available for public discussion and debate prior to its presentation in Parliament. When the Employees Trust Fund Bill (ETF) was tabled in Parliament by Hon (Capt) C. P. J. Seneviratne, Minister of Labour on 21st August 1980 and thereafter the second reading was taken up for debate on 3rd September 1980, it provided space for deliberation and debate.
The present government has introduced and passed important Bills such as the abolition of the 17th Amendment and introduction of the 18th Amendment concentrating power in the Executive President with only one day’s parliamentary debate and no space for public debate. The Employees’ Trust Fund was discussed and debated for 1 ½ years before its presentation in Parliament by the Minister.
It is also relevant to point out that on 12th February 1958 when the first reading of the Employees Provident Fund (EPF), then known as the National Provident Fund Bill was moved, Dr. N. M. Perera, M.P and Leader of the Opposition said “The National Provident Fund Bill was presented only yesterday. The only point in regard to this item is that there are a number of members of the Opposition who would like a little time to consider this Bill……..... I do not want Bills rushed through”.
The statement speaks of the stature of men both in Government and Opposition working in the public interest. The Bill was debated for four days from 20th February to March 7th 1958, and then referred to the Standing Committee B which considered suitable amendments for 21 days before presentation to the House.
The roles of the Consultative committees in Parliament have evolved over the past few decades from a focus on legislation to a focus on executive action. Members of Parliament utilize the Consultative Committee meetings mainly to address practical matters relating to their constituents. This is in sync with the transformation of Parliament itself from legislature to quasi executive with a disproportionate number of MPs being allocated executive powers and privilege.
The backbench is fast disappearing. The environment for making the Consultative Committees focus on legislation is absent. A possible solution would be to amend standing orders so that every Bill is referred to the Consultative Committees for report immediately after tabling in Parliament and then taken up for debate only after the Committee’s report.
The government assumes that with a two third majority in Parliament it can override the Opposition in Parliament without due consideration to process, debate and accommodation. A faulty understanding of the government’s majority is at the heart of this seeming arrogance. It appears that even dissenting views within government are not being heard. Democracy is the right of the majority to govern with the consent of the minority. A government which does not permit its peaceful democratic opposition to function freely is inviting the public to take the battle to the streets as we have seen in the past week.
The Private Sector
There was a time when the Washington consensus was to reduce the role of government regulation. But the world has gone beyond that. The emerging view is that government is at its best when it enables private enterprises to be competitive and efficient through regulation and facilitation to protect the interests of all stakeholders, including the wider society and the environment.
The proposed Pension Bill was based on employee contributions with virtually no cost to government. It was adding costs to workers and not promising them a fair benefit in return. It was also adding cost to business and retarding labour productivity. The Employers who had common cause with the workers unfortunately took the path of least resistance betraying the cause of workers. Or was their silence bought based on favourable concessions given in the budget and an alignment of financial interest between dominant shareholders and politicians?
Owners and Senior Management will do well to take note that government patronage out of fear or favour, betraying the cause of workers, will end in grief. The female workers of the Free Trade Zone seen on television channels spoke of their meagre life style, and the poor quality of rice and dhal they eat so that they can save for an impending marriage or to take care of aging parents. In a country where Direct Foreign Investment is at a low ebb, it is understandable that domestic investment will need to increase.
Corporate profitability has to come with better management, relevant technology and higher labour productivity. If the Social contract is between the Employer and the Employee as the government readily reminds workers who demand pay increases, then what right has government to impose a pension plan on the private sector workers without consulting them?
The Rights of Workers
Governments have from time to time made various proclamations protecting the rights of workers. Prominent among those are the announcement of a Worker’s Charter in 1995 under the Presidency of Chandrika Kumaranatunge, in which Mahinda Rajapakse was the Minister of Labour.
The Workers Charter did not become law as the business chambers successfully lobbied the then government, which put it on the back burners. However, it is surprising that the Government of President Mahinda Rajapakse who is widely acclaimed to be the champion of the Worker’s Charter has also ignored the safeguards for working people enshrined in the Worker’s Charter. Foremost among those recommendations have been the freedom of association, the right to organise and collective bargaining.
Trade Unions have been agitating for government ratification of ILO conventions 87 and 98 adopted in 1948 and 1949, to give legal effect to the rights of association, organisation and bargaining. The defence of their human rights require government attention. It is also pertinent to advocate laws that will encourage a spirit of entrepreneurship which will increase economic value and employment opportunities. The balance between the rights & responsibilities can be negotiated by a mature trade union movement, employers and government.
Average life expectancy has increased from about 55 years in 1948 to 75 years in 2010. Therefore, employees require larger resources to sustain post retirement life. As people are healthier and most seek continued employment after 55 years, it would be beneficial for the employee, the employer and the economy to extend the retirement age from 55 years to 60 years. Pension schemes to be sustainable have to be funded. By increasing the retirement age even if a pension scheme was introduced, the Pension liability would come down. Meanwhile the employee will continue to make a productive contribution. While physical strength may decline with age the mental agility remains strong for most.
The Employers’ major concern will be that non-productive employees will be legally entitled to continue employment with its consequent benefits. There should be no dispute that unproductive employees (those that are not contributing positively to the value of their organisation) should be discontinued. However, non-productivity is not an issue only for those retiring but is a wider issue. The legal framework and the process should be in place to penalise unproductive employees. But it will be unfair to terminate all employees at a relatively young age to address the issue of a few unproductive employees.
Sri Lanka has an aging population and the time has now come to make the legal retirement age 60 years so that all employees are treated equally before the law, rather than depend on the discretion of managers to obtain an extension of employment beyond the current age limit of 55 years. It must also be mentioned that most countries with high life expectancy have already abolished a retirement age limit or made it 65 years. The government should consult stakeholders and reassess the current retirement age limit which is far too low for a country with an average life expectancy of 75 years.
Eran Wickramaratne is a member of Sri Lanka's parliament representing the opposition United National Party. He is a former banker and was chief executive of NDB Bank