ECONOMYNEXT – Around 65 percent to 75 percent of the cost at the green-leaf stage in regional plantation companies (RPCs) comes from the attendance-based minimum wage system, according to a report released by Advocata Institute, a think tank based in Colombo.
This contributes significantly to the cost of production of Sri Lanka’s tea industry.
The findings emphasise the need for RPCs, and the industry at large, to consider embracing alternative wage models such as the revenue share and outgrower models.
These suggestions are rooted in the context of grappling with soaring production costs, falling productivity, and the impact of the current wage structure on estate workers.
The report juxtaposes the minimum wage model with the more market-driven remuneration approaches observed in the smallholder sector.
It underscores how the attendance-based system, being predicated solely on attendance rather than performance, severely curtails “productivity incentives”.
One of the consequences of the minimum wage model is the persistent issue of low earnings and constrained earning potential for workers, ultimately leading to a labor shortage.
The report flags this shortage as an exacerbated problem, with workers increasingly veering away from agricultural labour, gravitating towards other employment options that offer higher compensation.
Stakeholders within the industry advocate for alternative wage models that lean towards rewarding productivity rather than mere attendance.
A proposed revenue share system departs from the weight-based remuneration of the outgrower model, and aligns workers’ incentives with quantity and quality of tea leaves produced.
This ensures that workers are motivated to prioritize quality, creating a sense of ownership and responsibility. It also drives them to adopt best practices in plucking and processing.
This effort aims at producing superior-grade tea, better market prices and increased competitiveness.
The report finds that the revenue share model comes with challenges; It requires a transparent mechanism for revenue calculation and distribution, presenting a potential administrative hurdle.
Moreover, negotiating fair revenue-sharing percentages that satisfy both workers and plantation owners can be subject to contextual nuances.
The report said that these proposed models draw inspiration from the market-driven ethos observed in the smallholder sector.
In this sector, workers are remunerated based on both the quantity and quality of their output, fostering higher productivity and a dignified approach to labour provision.
The report advocates for alternative, market-oriented wage models to uplift productivity, enhance worker welfare, and bolster the industry’s global competitiveness, in addressing the multifaceted challenges faced by large-scale tea plantations in the country. (Colombo/Dec28/2023)