RPCs propose productivity based, self-managed wage model | Sunday Observer

RPCs propose productivity based, self-managed wage model

24 November, 2019

Moving away from the 150-year-old attendance based, management dependent wage model towards a productivity based, self-managed, wage model is the way out for the plantation sector which is going through a tough time due internal and external factors, do not augur well for the perennial and one time lucrative industry, a well-known tea industry veteran said.

Hayleys Plantations Managing Director and Past Chairman of the Planters’ Association, Dr. Roshan Rajadurai said the Regional Plantation Companies (RPCs) had proposed the ‘Revenue Sharing Wage Model’ several years ago to replace the old wage based model which is not sustainable for the industry which is facing stiff competition in the global market.

He said the plantation industry cannot go on with an impractical archaic system where workers depend on the management for wages instead of increasing productivity which enables them to earn higher wages.

According to planters, many RPCs are incurring losses due to the drastic fall in global tea prices following the escalating tensions in tea importing countries.

Sri Lanka exports around 95 percent of its tea produce and when the cost of production (COP) is higher than the competitors we cannot compete in the global market.

Sri Lanka’s is higher than India and Kenya and if we want to compete we need to be competitive in cost. Labour and wage issues are some of the pressing problems faced by the plantation industry.

The quantity picked by local pluckers which is around 18-20 kgs per day is low compared to 40 in India and 60 in Kenya.

The new wage model will guarantee 10 days work per month on the current estate wage model and for the rest of the days wages to be paid on a productivity based scheme where for every kilogram plucked a specific rate will be paid as it is done in the tea smallholder sector. The productivity based tea smallholder model that has been practiced in Sri Lanka for over 50 years has been proved to be a successful and sustainable model not only in Sri Lanka but also the world over,” Dr. Rajadurai said.

However, he said it would be too radical to completely break away from the age old attendance based, management dependent wage model. Therefore, the RPCs have proposed an interim model of productivity based, self-managed, wage model for the RPC plantation sector.

The productivity based ‘Revenue Sharing’ wage model encourages participation of workers in economic activities that make the best use of their talents, efforts, experience, competencies and skills and enable them to improve their earnings.

“High productivity workers will be unencumbered by the union or peer pressure that precludes higher outputs by individuals when they work in gangs of 40 to 60 workers together in the same field, side by side,” he said, adding that there have been many instances where the high productivity workers were forced to conform to the gang average outputs and reduce their out puts to gang average levels and this is very evident in the fields.

He said an individual determined productivity model will foster economic activity, productivity growth and economic prosperity to the people involved, who must be provided with the incentives for them to work.

“This system has resulted in more crop being harvested with improved leaf standards which has led to better prices and very much lower COP for the estate. Higher prices have eventually resulted in higher green leaf rates being paid to the growers on the ground and result in increasing their overall income,” he said.

As a result of higher earnings, the growers’ attendance at work has improved significantly and dramatically; as they now work as self-directed and self-managed entrepreneurs responsible for their own earnings and not as hired daily paid workers under the constant close supervision of the management, a necessary legacy carried on from colonial times in managing workers in estates.

The methodology adopted in the productivity based revenue sharing model is to assign each registered worker/family a predetermined number of tea bushes / block of tea bushes with a comprehensive agreement covering all the areas of operational, managerial and agronomical importance. All agricultural work, agronomic practices and the harvesting is to be done by the grower himself and the leaf will be compulsorily supplied to the designated estate factory.

A predetermined percentage (35%) of the estate Net Sale Average (NSA) or 50 percent of the Bought Leaf Rate according to the Tea Board formula, is to be paid as green leaf cost as done in the tea smallholder sector. This will encourage higher productivity, leading to higher income earning capacity for the growers and reduce the COP for the industry.

Essentially, the government will continue to own the estate land as all estate lands belong to the State. The estate, managed by the RPC on lease, will own the stock of tea bushes, while the grower will own the crop/flush generated on the tea bush.

“This method will obviate unnecessary legal and social complications and it will be applicable to registered workers of the estate and there will be specific restrictions imposed on how the land is to be used, what activities can be engaged upon and methodology to recover lands that are not managed to the required standards and agreements,” Dr. Rajadurai said.

Each worker will be assigned sufficient tea bushes for three days of work for a week with a mix of all categories of tea fields in different locations.

An agreement is to be signed between the growers and the estate management for a duration of one year and will be automatically renewed, if the conditions and standards are maintained in the assigned block.

The cost of fertiliser, chemicals and other inputs are recovered by the estate on monthly cost recovery instalment basis. If the important agricultural work is not done by the grower, the estate will undertake it and recover the cost from the growers. Payments for leaf supplied and other agricultural work done will automatically attract EPF and ETF.

Responsibility of the RPC and planters and other stakeholders will be to assist, create awareness, train, monitor, study, evaluate and give solutions for proper agricultural management of the blocks.

The management will also ensure the supervision and the execution of all the standard harvesting and field maintenance practices related to plantation agriculture while carefully maintaining records of input supplies, purchase of green leaf and the adherence of the ‘Terms and Conditions’ of the agreement.

The current wage model is ‘attendance based’ one where the estate has to compulsorily offer a mandatory minimum of 300 days of work per year to the workers irrespective of the conditions on the ground or the worker’s daily work output or productivity levels where they are supervised and monitored by the management.

“The need to change the management dependent, entitlement minded and welfare oriented model of plantation operation with low factor productivity, coupled with low potential for individual revenue maximisation and daily wage based system, needs immediate change,” Dr. Rajadurai said.

The tea industry, the world over, has already adopted this productivity based revenue sharing model for the past few decades and this has been successfully implemented in India and the African countries where growers are reaping substantial financial gains, reflected in the progress and the vibrancy of the industry and the grower sector in particular in those economies.

“This is amply reflected in the output of the workers and consequently the increased earnings they have gained. In Sri Lanka, we have smallholders who now contribute 75% of the green leaf produced in our country, operating on the productivity based revenue share model which is ample testimony to the success of this model.

“The success of the productivity based revenue sharing model is evident by the growth of the 425,000 strong tea smallholders who cultivated only 60,000 ha in 1992 but within the space of 20 years, doubled the extent to 121,000 ha by 2012. The crop increased by two-and-a-half-fold.

“Eighty-eight percent of the smallholders have only less than half ha of land and 97 percent of all tea small holdings are below one ha.

The smallholders have even earned up to Rs. 65 per kilo of green leaf in 2014, Rs. 60 per kg and in 2016 it went up to around 90 per kilo of green leaf.

“Currently, the pluckers in the smallholder sector are paid Rs. 20-25 per kilo of green leaf without any other payments such as EPF, ETF and gratuity, and with no other additional facilities, services and amenities as provided for RPC workers.

“Even with such a low wage structure per kilo, their ‘Quality of Life’ is far superior to that of the RPC workers for whom all the benefits and facilities are provided free on estate account.

“Therefore, the productivity based revenue sharing model is a tried, tested and a well trusted model for the 160,000 RPC workers to follow with confidence as over 400,000 smallholders follow it without any extensive assistance,” he said.