India and Sri Lanka’s severance pay policies are meant to protect workers, but in reality, they often make it harder for businesses to hire and restructure. Since neither country has an unemployment insurance system, severance pay acts as a crucial safety net for workers who lose their jobs. However, complicated labour laws, high costs, and legal hurdles make the process inefficient and unpredictable. These rigid policies discourage companies from expanding their workforce or making necessary changes. The report emphasizes the need for simpler severance pay regulations, better financial planning, and policies that support both workers and businesses to boost job creation and economic growth.
Severance pay in both countries covers gratuity, retrenchment benefits, and voluntary retirement schemes (VRS). In India, businesses must get government approval before laying off large numbers of workers, which creates long delays and uncertainty. Meanwhile, Sri Lanka’s system gives the Labour Commissioner full control over compensation, making payments inconsistent and sometimes too expensive for employers. At the same time, most workers in both countries lack access to formal social security, meaning they rely on personal savings and family support when they lose their jobs.
The report suggests creating a structured severance pay formula to make the process fairer and more predictable for both employers and workers. Other key steps include attracting more investment, training workers for new industries, and reforming outdated policies to create a more flexible, employment-friendly economy.
If India and Sri Lanka want to create a stronger, more sustainable job market, they need to strike a balance between protecting workers and allowing businesses to grow. By making severance pay systems clearer, more efficient, and financially stable, both countries can ensure job security while driving long-term economic success.
Keywords: Severance Pay, Labour Market, Employment Laws, Social Security, Economic Reforms, Trade and Investment, Retrenchment Benefits, Labour Regulations, Public and Private Sector, Job Creation, India, Sri Lanka
An Analysis of Severance Pay Policies in India and Sri Lanka
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