Regional Plantation Companies Ink Productivity-Linked Wage, maintains call for transition to revenue sharing model

- Says attempts to help workers become entrepreneurial is definitely the next step

Over kilos at Rs 25/- per kg nett will help enhance daily wage to meet aspirations

The Planters Association of Ceylon (PA) announced that the RPC’s had officially entered into a new collective agreement with plantation sector trade unions to increase estate worker minimum daily wages to Rs. 730. With statutory dues, total wages will be Rs 805. A historic implementation of a new productivity-linked incentive structure has been added.

While welcoming the new productivity incentive, RPC’s strictly maintain that swift transition to a revenue-sharing model that places control of revenue quantum in the hands of workers by giving them a stake in its produce and transforming workers into entrepreneurs would be the only way to meaningfully resolve the crisis plaguing their industry.  Planters’ Association reiterates that the 150 year old, outdated, daily labour wage remuneration model must be changed to one where, instead of being paid for labour, workers are empowered to be in control of their revenue generation.

The revenue share/out - grower model is the practice successfully carried out by over 425,000 smallholders for over 50 years and who now contribute to more than 75% of the national crop.

The RPC’s also stated that it would continue to support the implementation of such a revenue sharing system, with the current collective agreement serving only as a transitionary solution.

Through the agreement estate workers will now be paid a basic wage of Rs. 500, in addition to the Price Share Supplement (PSS) of Rs 30, leading to a total guaranteed wage of Rs. 530. A further attendance incentive of Rs 60 will be provided to workers who maintain a minimum attendance of 75% , while a new productivity incentive of Rs. 140 will also be provided for workers who obtain the estate/divisional norm, leading to a minimum total wage of Rs. 730.

“At the outset, we would first like to register the serious reservations that the Planters Association maintains with regard to the recently completed Collective Agreement. The agreement as it stands in its final form is one which still places the tea industry and the livelihoods of all Sri Lankans employed in the sector in serious jeopardy. The revenue sharing model would have been the best shot for workers to escape the kind of lifestyle they have been born into.

“Nevertheless, the fact that we were finally able to secure a wage formula that is linked to productivity is ultimately an extremely important step, one that will help to transition our industry towards a revenue sharing model which the RPC’s firmly maintain is the only viable method of returning the sector towards a more sustainable trajectory,” PA Chairman, Sunil Poholiyadde cautioned.

Prior to the new agreement, which had been stalled due to strong opposition against clauses related to productivity from trade unions and affiliated political groups – the total plantation wage stood at Rs. 620 per day with no provisions in place to incentivize productivity, with the incentive structure instead being focused based on archaic colonial-era attendance requirements. However following the signing of the new collective agreement, estate workers will now be paid with a Rs. 140 productivity incentive for harvesting the minimum estate/divisional norm.

Notably, workers will also be paid an additional productivity incentive of Rs 25 per kilogram for green leaf harvested above the estate/ divisional norm, which if they pluck an additional 7 kgs a day, would accumulate their daily wage to Rs 975/-. The productivity incentive structure which the PA has championed for many years is the most pragmatic and mutually beneficial method of improving labour productivity while ensuring that increased wages are made to be financially viable.

“Through the inclusion of this additional incentive, we have been able to effectively expand the upper limit of what our field employees are capable of earning while at the same time providing them with a meaningful incentive to improve productivity. It is well known that Sri Lanka’s rates of productivity are among the lowest of all tea producing economies and if this industry is to survive, this trend must be reversed as soon as possible.” Poholiyadde explained.

At present, Sri Lanka’s cost of production rates among the highest in the world at Rs. 575 per kilo, as compared with Rs. 450 per kilo in 2015. Meanwhile, current sales averages at the Colombo Tea Auction for Western High Grown tea stood at around Rs 440 per kilo, translating into an average loss per kilo of Rs. 130.

Losses in the sector were further aggravated by sporadic collective action instigated by trade unions that resulted in Regional Plantation Companies being forced to incur substantial further losses, as a result. In that context, Poholiyadde warned that even the latest agreement would only serve as a temporary stop-gap and would do little to preserve an industry that currently directly supports the livelihoods of over 1 million Sri Lankans.

“There are numerous reservations that the PA still holds in relation to the newly signed collective agreement and we firmly maintain that our industry must adapt if it is to survive in a very challenging and highly competitive global market,” Poholiyadde asserted.

Noting that the industry would still continue to face serious systemic challenges – such as an urgent need to re-plant the country’s aging tea bushes, diversify its crops and address looming chronic labour shortages - he nevertheless maintained that such challenges could only be resolved once a swift transition into a revenue-sharing model had been made.

“This type of model has been deployed with great success among Sri Lanka’s tea small holders. As a result, not only has productivity improved drastically but our small holder producers have also been empowered with a much greater degree of financial independence.

“While it is possible that a transition to such a model would significantly alter the influence of certain organizations with vested political interests, it is clear that the revenue sharing model is the only one capable of meeting the aspirations of our estate communities while still allowing for our country’s tea industry to continue to exist over the medium-long term,” he stated. 

Released in October 2016