SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
legally binding on both parties. While CBAs can pro - vide better terms than those mandated by statute, they cannot reduce or override statutory protections. Furthermore, case law plays a significant role in inter - preting statutory provisions, especially in areas such as unjust dismissal, constructive termination and employer obligations, although statutory law takes precedence. 4.2 Characteristics of Employment Contracts Employment contracts may be concluded either in writing or verbally, as there is no statutory require - ment mandating written contracts. Verbal contracts are legally valid and enforceable, provided the essen - tial elements of a contract – such as offer, acceptance, intention to create legal relations, and consideration – are present. In practice, labour tribunals regularly uphold employ - ment relationships established through conduct and surrounding circumstances, supported by docu - mentary evidence such as salary slips, attendance records, or letters of appointment. Nevertheless, best practice dictates that employers issue letters of appointment or employment agreements, especially to satisfy evidentiary requirements, and to clarify the terms of engagement including probation, termina - tion, job duties and benefits. Regardless of whether the contract is written or oral, certain statutory conditions are automatically implied into all employment relationships. These include pro - visions relating to minimum wages, working hours, weekly rest, leave entitlements, public holidays, ter - mination procedures and retirement benefits, arising from legislation mentioned in 4.1 Nature of Applicable Regulations . There is no legal restriction on the duration of employment contracts in Sri Lanka. Both permanent and fixed-term contracts are recognised. However, courts and tribunals are cautious of abuse of fixed- term arrangements. Where fixed-term contracts are renewed repeatedly without a genuine basis, they may be reclassified as permanent contracts, giving rise to the same protections and entitlements as perma -
nent employment, including the need to obtain prior approval under TEWA for termination. Additionally, Sri Lankan law now prescribes a statutory minimum retirement age of 60 years for all private sec - tor employees, as introduced by the Minimum Retire - ment Age of Workers Act, No 28 of 2021. Employment contracts that specify a lower retirement age must be adjusted accordingly, unless an exception is pro - vided by regulation. Employers may, however, retain employees beyond age 60 based on mutual agree - ment. 4.3 Working Time Working time regulations are primarily governed by the Shop and Office Employees (Regulation of Employ - ment and Remuneration) Act, No 19 of 1954, and by the Wages Boards Ordinance for all other trades. For employees falling under the Shop and Office Employees Act, the standard working time is generally limited to eight hours per day and 45 hours per week, excluding intervals for rest and meals. Overtime work, defined as work performed in excess of the stand - ard daily or weekly limits, must be compensated at a premium rate. The standard rate for overtime is 1.5 times the normal hourly wage, while work performed on public holidays is usually paid at two times the nor - mal rate. The law imposes a cap on overtime, limiting it to a maximum of 12 hours per week. For sectors covered by the Wages Boards Ordinance, working hours and overtime entitlements are deter - mined by the respective Wages Board constituted for the trade. While the structure of these boards allows for some variation depending on the nature of the industry (eg, manufacturing, plantation, hospital - ity), the standards generally align with the framework established under the Shop and Office Employees Act. In most cases, Wages Boards also provide for overtime compensation at 1.5 times the regular wage, though specific entitlements and limits may vary slightly across sectors. Employers are legally obligated to maintain accurate records of working hours and overtime, and failure to compensate overtime in accordance with applicable
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