Labour Law in Sri Lanka – An Easy Guide to the Shop and Office Act

As an employer, it’s your duty to do right by your employees. 

Here’s the problem though – you can’t make sure you’ve got all your bases covered unless you know all the rules you need to play by. 

But, how do you keep track of all the labour laws?

This is where the Shop and Office Act comes into play. 

Think of it as an employer’s playbook. This act lays out the law of the land, and it’s absolutely imperative that you know everything about it. 

However, labour law in Sri Lanka can get a little hard to follow. It’s filled with complex language and tends to drag on.

So, if you’ve been having a hard time getting the hang of all the rules or you’re looking for a simplified version of everything you need to know – this is the blog for you.

We’ll walk you through all the important bits and pieces of Sri Lankan labour law in this article and make sure you’re well versed in your basics. 

Who does labour law in Sri Lanka apply to?

Today, we’re going to be talking about the Shop and Office Employees (Regulation of Employment and Remuneration) Act No 19 of 1954.

This act was written about the labour laws in Sri Lanka.

The laws in this act apply to every employee working in Shops and Offices in Sri Lanka.

An important feature to notice about this act is that it applies equally to local employees and foreign employees. It makes no distinction between the two.

Who is an employee? 

An employee is defined as a person who is employed in or about the business of a shop or office. 

However, there is one exception to this definition.

If the person under employment works in a bazar or works for charitable/other purposes that is:

1. Carried on for either one month or less OR;
2. In business in connection with funerals OR;
3. A member of tutorial staff of schools OR;
4. A watcher or a caretaker

then, the Shop and Office Act does not apply to them.

What does the Shop and Office Act talk about?

Think of it as an instruction manual to being a lawful employer. 

Read the act’s laws, and you’ll learn all the rules you need to follow when employing people. 

However, the whole thing is very long and written for lawyers – not everyday folks like you and I. 

That’s why, we’ll be talking about all the relevant rules right here today.

As an employer, you need to know all – if not the most important rules listed in the act like:

1. Minimum age of employment 
2. Minimum wages 
3. Regulation of hours of employment 
4. Holidays 
5. Meals 
6. Sanitary and washing facilities 
7. Maintaining records
8. Maternity benefits 
9. Payments

You need to follow all of these rules to a tee.

Let’s take a look at each of them in-depth!

Minimum age of employment

You can only hire an employee that is 16 years old or above. 

Anyone who is under the age of 16 cannot be employed.

However, there is one exception to the rule:

If someone is under the age of 16, they can be involved in:

1. Agri-business activities of their family OR;
2. In a business activity that is organised for an educational/charitable purpose

But, remember – this is only okay as long as the person takes part in these activities before or after school.

So, whenever you’re hiring employees, make sure that they meet this age requirement on the date of appointment.

Minimum wages 

The minimum wage for a month is LKR 12,500. 

In addition to this, you have to provide your employees with a budgetary allowance of LKR 2,500 + other allowances of LKR 1,000.

This is defined in the National Minimum Wage of Workers Act No. 3 of 2016.

Regulation of hours of employment 

You can’t make an employee work over 8 hours a day.

This means that they cannot work more than 45 hours per week.

If in case you need them to work longer than 45 hours a week, you need to pay them overtime. 

Overtime

Overtime is when an employee works beyond their normal hours of work (45 hours).

The amount of overtime hours they can work for per week is limited to 12 hours only, however.  

An employee who works overtime has to be paid one and a half times their usual hourly rate.

Holidays

Under the Shop and Office Act, an employee can take certain types of holidays:

1.  Weekly holidays
2.  Annual leave
3. Casual leave or sick leave
4. Public holidays
5. Full moon Poya holidays

Let’s take a look at each type of holiday.

Weekly holidays

If your employee works for 28 hours or more every week, they’re entitled to one and a half days of paid leave. 

Usually, they get these holidays as a half-day on Saturday and a full day on Sunday.

However, many companies give the entire Saturday off as well.

Annual leave

Your employees are entitled to 14 days of annual leave a year for every year they’ve worked for. 

Annual leave is calculated depending on when the person has been employed.

Legally, leave is calculated depending on the date of employment:

So, this is how your employee’s annual leave would be calculated depending on when they were hired:

Time period the employee was hired on their first year	Number of annual leave they’ll be entitled to on their second year
Between January 1 and March 31	14 days
Between April1 and June 30	10 days
Between July 1 and September 30 of the previous year	7 days
Between October 1 and December 31	4 days

Remember, this is paid leave. Meaning – the company pays for these types of leave. 

Also, if you terminate your employee, and they still have some of their annual leave left – they can utilize that as paid leave before the date of termination.

Casual leave or sick leave

Your employees can take 7 days of paid leave for:

1. Private matters 
2. Ill health 
3. Or any other reasonable cause

This type of leave is also paid for by the company. 

Also, this only applies to employees who have been working in your company for over an year. 

If they’re in their first year of employment, they can only take one day of casual leave for every two months of service.

Public holidays

Sri Lanka has a few public holidays on its calendar. These holidays are always paid for by the company (they’re usually Mercantile holidays).

These holidays include:

1. Independence day
2. May day 
3. Sinhala and Tamil New Year
4. Christmas and etc.

If you need your employees to work on these holidays, they have to be paid a minimum of twice their daily salary. 

You also need to grant your employees paid holidays on all of the full moon poyas. If you require them to work, you need to pay them a minimum of one and a half times the daily salary.

Meals

If your employees work more than 5 hours a day, you need to give them intervals to eat their meals. 

For every four hours of work an employee does, they can take a half an hour break to eat their meals. 

So, your average employee (that works 8 hours a day) will get an hour to eat their meals. 

In addition, you also have to provide and maintain a suitable place for your employees to have their meals as well. 

Sanitary and washing facilities

You have to provide and maintain a suitable sanitary and washing facility for your employees at your place of work. 

You also have to make sure that these facilities are separate for male and female employees. 

However, there’s an exception to this rule. 

If you can prove to a ‘prescribed officer’ that suitable sanitary facilities are available within a certain distance, they will give you a certificate exempting you from having an onsite facility. 

By the way, this ‘prescribed officer’ can be:

1. The Commissioner OR;
2. The Deputy Commissioner OR;
3.  An Assistant Commissioner

Records

You need to keep a few documents and records of your employees at the shop or office like:

1. A service record
2. A remuneration record with the following details:

• Name, age and sex
• Grade and designation
• Remuneration period
• Number of hours of work done
• Hours of overtime
• Rate of remuneration payable and gross remuneration for the period
• Allowances payable
• Deductions from gross remuneration
• Advances made
• Contributions made by employer and employee to a pension or provident fund
• Total amount of overtime
• Balance remuneration paid and the date of payment
• The amount recovered under the Income Tax Ordinance or other law
• Acknowledgement of the employee of remuneration received

It’s absolutely necessary that you keep these records up to date. 

Even after termination, you need to maintain these records for up to two years.

Any other records should be kept for 4 years.

Maternity benefits

If or when your female employees decide to have children, they’re granted paid leave after the birth of their child/children. 

For the first and second child, they will be entitled to 84 days of paid leave. These 84 days include 14 days of pre-confinement leave as well. This means that your pregnant employee can begin their maternity leave 14 days before their due date. 

After the second child, they’re entitled to 42 days of paid maternity leave, with 14 days of pre-confinement leave.

You also can’t terminate her employment because of her pregnancy, or any complications due to the pregnancy.

You can’t also hand out a notice of dismissal during the period of leave.

Maternity leave is in addition to any holidays or annual leave that an ordinary employee is entitled to.

If a female employee is nursing a child under one year, she must be allowed 2 nursing intervals within a period of 9 hours.

If an employee has given notice of her pregnancy, she cannot be employed in any work that could be harmful to her or the child.

Payments to employees

An employee’s salary must be directly paid to them.

You need to pay them their full amount after making necessary deductions like:

1. Authorised deductions (example: advance payments):
2. Deductions according to the Income Tax Ordinance or the Inland Revenue Act;
3. Any other deduction made or issued by a court of law

You need to have a fixed period as to when you pay your employees. 

There are a few rules to paying your employees depending on when you pay them:

1. You can’t take more than a month to pay your employees
2. If your payment period doesn’t exceed a week, you have to pay them within 3 days of the end of the period
3. If your payment period is more than a week, but less than 2 weeks, you have to pay them within 5 days after the end of the period
4. If your payment period is over within 2 weeks, you have to pay your employee(s) within 10 days of the end of the period

An assessment of the salary is possible but it should not be less than the amount paid before.

Now, let’s talk about what the labour laws you have to follow when you either fire an employee or they hand in their resignation. 

Well, regardless of whether you terminate their contract or they hand in their resignation – you need to pay them however much they’re due before the end of the 2nd day after their termination.

Speaking of termination, let’s take a look at what you need to know as an employer about it. 

Termination of employment

There are two acts that talk about termination:

1. The Industrial Disputes Act (IDA) 
2. The Termination of Employment of Workmen Act (TEWA).

Both of them talk about a few common points.

Basically, you can terminate your employees’:

i.   With the consent of the employee (e.g. in the form of a resignation) or;

ii. With the written approval of the Commissioner of Labour (COL) or; 

iii. With justifiable cause

But what counts as a ‘justifiable cause’?

Well, they can include:

1. Misconduct
2. Unsatisfactory performance
3. Persistent and unauthorised absence
4. Abusive/unruly behaviour
5. Dishonesty and theft
6. Intoxication

These reasons are all based on discipline issues. 

You can also terminate an employee based on non-disciplinary reasons like:

1.  Inefficiency/incompetence
2. Breach of contract
3. Conviction of an offence

Remember, these aren’t the only reasons you can terminate your employees for. There are a few more. However, these will give you an idea of what grounds are accepted by law.

It’s important to remember your employee can challenge their termination.This means that they can file a case against you at the labour court. 

If they do, you need to be able to give the courts proof as to why you fired them. 

Period of notice

You need to allow for a period of notice before termination.

It’s important to remember that if an employee is terminated without notice it must be for proper cause. If not, there could be legal consequences on the basis of an unjust termination.

Run your business problem-free with Simplebooks

When you’re busy running a business, it can be hard to keep track of all the dos and don’ts.

The problem is that you absolutely need to. Sri Lanka law doesn’t take kindly to those that don’t.

But how do you do both? Run a successful business AND make sure you’re by the books?

Well, for starters – you need a good Payroll Manager.

Having an experienced and well versed Payroll Manager is key to compliance. From there on, you can move on to good payroll practices and so much more.

And guess what? Simplebooks helps you with all of these things – at the most affordable rates.

Take a look at our services here. 

Also! You should stay informed about why these aspects of running a business are important.

Read these blogs to start learning all your basics. 

Why do you need a Company Secretary? What can they do for your business?

An entrepreneur’s guide to bookkeeping

Business owners guide to accounting firms and audit firms in Sri Lanka

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