In Sri Lanka, the termination of employment is governed by the Industrial Disputes Act No. 43 of 1950, as amended (“IDA”), and the Termination of Employment of Workmen (Special Provisions) Act No. 45 of 1971, as amended (“TEWA”). These laws apply across all categories of employees.
On a collective application of these statutes, termination of employment in Sri Lanka can only be effected in the following circumstances
- With the employee’s explicit consent, typically in the form of a resignation or mutual separation;
- With the prior written approval of the Commissioner of Labour (“COL”); or
- For a justifiable cause.
An aggrieved employee may seek redress by filing an application within six months of such termination to either to a Labour Tribunal under the IDA or the Termination Unit of the Labour Department under TEWA, where the termination is not on account of disciplinary grounds, provided that the other pre-requisites are met.
The amount of compensation that may be awarded by COL under TEWA is regulated by specific provisions. Labour Tribunals in Sri Lanka award relief that they deem “just and equitable” based on the unique circumstances of each case based on the evidence presented before it.
Redundancy Laws in Sri Lanka Explained
Termination of employment by way of redundancy or severance in Sri Lanka can be implemented under two specific circumstances:
- With the employee’s consent or
- With the prior written approval of the COL.
Option (a) involves the employee tendering their resignation in exchange for a severance sum, generally by a severance agreement signed by the employee and employer.
Option (b) involves making an application to the COL under TEWA to seek approval for the termination of the employee(s). Option (b) would apply if the employer anticipates:
- Closure of operations or the cessation of business by the employer;
- Reduction of workload/removal of specific job functions where such scope of work is no longer carried out by the employer; or
- Financial constraints of the employer, where maintaining the current workforce is no longer viable
If the COL grants approval for termination, the compensation payable to the employee will be determined according to a formula set out in the Extraordinary Gazette No. 1384/07 dated 15th March 2005 (“Termination Gazette”).