SRI LANKA Law and Practice Contributed by: Ayanthi Abeyawickrama, Varners
Employment contracts are recognised and enforceable, but they must comply with the minimum standards set by statute. Contractual terms more favourable to the employee than those prescribed by law are valid, but any term less favourable than the statutory minimum is void to the extent of such inconsistency. The principal statutes regulating employment include: • the Wages Boards Ordinance, which sets standards, minimum wages and working con - ditions in all trades; • the Shop and Office Employees (Regulation of Employment and Remuneration) Act, No 19 of 1954, for employees in shops and offices; • the Factories Ordinance, which is applicable to industrial establishments and sets basic health and occupational safety standards; • the Industrial Disputes Act, No 43 of 1950, which regulates terminations, disciplinary action and resolution of disputes; • the Termination of Employment of Work - men (Special Provisions) Act, No 45 of 1971 (TEWA), which requires prior approval or consent for termination of certain categories of employees; • the Payment of Gratuity Act, No 12 of 1983; and • the Employment of Women, Young Persons and Children Act. In addition, employers must comply with statu - tory provisions governing working hours, leave entitlements and termination benefits, as well as social security obligations under the Employees’ Provident Fund Act and the Employees’ Trust Fund Act. In unionised workplaces or sectors with active trade unions, collective bargaining agreements
(CBAs) may supplement statutory protections and apply in parallel to individual contracts. These CBAs, once registered under the Industri - al Disputes Act, become legally binding on both parties. While CBAs can provide better terms than those mandated by statute, they cannot reduce or override statutory protections. Furthermore, case law plays a significant role in interpreting 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 requirement mandating written contracts. Ver - bal contracts are legally valid and enforceable, provided the essential elements of a contract are present – such as offer, acceptance, intention to create legal relations, and consideration. In practice, Labour Tribunals regularly uphold employment relationships established through conduct and surrounding circumstances, sup - ported by documentary evidence such as salary slips, attendance records or letters of appoint - ment. 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, termination, job duties and benefits). Regardless of whether the contract is written or oral, certain statutory conditions are automati - cally implied into all employment relationships. These include provisions relating to minimum wages, working hours, weekly rest, leave entitle - ments, public holidays, termination procedures
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