Thursday, November 27, 2008

Another curse in 2008 how much more is still awaiting?

You may have noticed that long before the international financial crisis took hold of the world, I have suffered from my own business crisis since the beginning of the year, firstly arising out of the weather, but latterly a myriad of other human resource and animal destruction related losses. Added to all this I had to meet with an official in the Labor Department in Colombo, today, to discuss how best I can resolve a demand for back dated social security deductions and penalties for two employees, one a house maid.

While the law should apply equally to everyone, wealthy Colombo households do not have to make payments on behalf of their many employees, but in a small, struggling and uneconomical agricultural farm, I have to make these payments for my few employees, irrespective of what they do. I know of some garment factories that recently shut, with no notice not even paying the wages of staff, let alone paying over the deductions for years, from their employees for EPF ETF. (social security)

No relief was given to me in this regard, with the assumption that the laws that apply to the large plantations, where the home help of the manager is also included in the liability for payroll taxes, also applies to my small farm.

I cant afford to fire my staff, as I have obligations to pay on dismissal, neither can I afford to employ them, and now I am even further burdened by the state regulations imposing the same level of taxes that a large establishment has to pay for its employees. I have been paying, these taxes all along, but the back-dating and harsh penalty for prior arrears, is something that cannot be paid without resort to borrowing funds. I may have to just tell my staff to work only half days to temporarily resolve this problem. I cannot see a practical way of carrying the burden of unproductive employees, who despite all the incentives, and encouragement have failed to be more productive. Sri Lankan labor laws are just too draconian.

The passive aggressive behavior of people who have been treated too well in the past, not willing to improve productivity, and who just do not follow instructions is a classic way of agricultural employees showing their dissent. It is something that has led most people in my situation to give up and sell their properties for development land and thus reduce further the land available for cultivation and add to the woes of the agricultural sector. I don’t see a solution to this intractable problem if the state goes after us.


Jack Point said...

it is these regulations that contribute to the inflexibility of the labour market.

Hiring someone is big decision because of all sorts of associated costs that go with it (apart from the wages paid) and because it is very difficult to get rid of them.

Therefore no one hires unless absolutely certain and this impedes business and long term job creation.

Anonymous said...

hi ranjit,
just wanted to say hi.