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Citation Information

Type Journal Article - Institute for Health Policy
Title Study on the Establishment of Maternity Protection Insurance in Sri Lanka
Publication (Day/Month/Year) 2014
URL http://ihp.lk/publications/docs/MB Report.pdf
As a state that has ratified ILO Maternity Protection Convention (Revised) No. 103, Sri
Lanka has consented to ILO review of its compliance with the Convention. As part of that
regular review, the ILO Committee of Experts has identified shortfalls in Sri Lanka’s
compliance with the Convention. The Government acknowledges difficulties in taking action
to achieve compliance, and it requested assistance from ILO to identify options for resolving
this issue of non–compliance. In response, ILO commissioned this report to assess the
feasibility of introducing a maternity protection insurance scheme to achieve compliance
within the framework of ILO Convention No. 103.
2. From the ILO and long–standing international perspective, maternity benefit protection
requires (i) financing of medical care for childbirth, (ii) provision of rights for women workers
to take leave from employment during and after childbirth, and (iii) provision of cash benefits
to mothers taking maternity leave.
3. Sri Lanka already finances from public funds medical care during childbirth for all mothers.
Levels of effective coverage are high and better than most comparable countries, and action
in this area is not required.
4. Sri Lanka provides the right to maternity leave and cash benefits during maternity leave only
to formal sector workers, namely public sector employees, and private sector workers in
formal employment contracts. These are financed by public funds in the case of those in the
public sector, and by employer liability in the case of private sector employees. These
arrangements cover about 46% of women in the labour force (2012).
5. Sri Lanka does not have any arrangements to provide maternity benefits to informal sector
workers and those in domestic and home wage employment. This constitutes the largest
gap in social protection in this area.
6. The rate of female labour force participation in Sri Lanka is one of the lowest in the region.
As Sri Lanka’s population ages and birth rates fall, the country will soon face contraction of
its available labour supply, and this will constrain future economic growth, the return on
invested capital and ultimately corporate profits and living standards in the country. In this
context, many countries seek to increase the overall labour supply by increasing female
labour force participation. Measures to improve maternity benefits generally increase
recruitment and retention of women by the workforce, and such benefits will become
increasingly important in Sri Lanka for sustaining economic growth.
7. Sri Lanka is one of only 24 countries in the world and one of only three in Asia – the others
being Mongolia and Papua New Guinea – that have ratified the ILO Maternity Protection
Convention (Revised) No. 103. The key features of this are that it sets minimum levels of
maternity benefits, and that it prohibits reliance on employer liability, requiring instead the
use of public funds or social insurance.
8. Sri Lanka can easily comply with the standards for minimum maternity benefits in
Convention No. 103 by amending current legislation to provide all covered workers with a
minimum of 84 working days maternity leave, and removing provisions that provide lesser
benefits for mothers having their third or greater child. This would impose only modest costs
on employers, and has the benefit of addressing a major source of inequality in amounts of
paid maternity leave that different workers are entitled to, and which all stakeholders agree
should be eliminated. We recommend that necessary action be taken to amend section 3(1)
(b) of the Maternity Benefits Ordinance.
9. There are benefits to the child, family and society for fathers to engage more intensively with
the rearing of children. Current awareness and support for the concept of paternity leave is
limited in Sri Lanka, although some stakeholders have proposed that this be introduced. We
recommend that the government take action to provide one week’s paternity leave for all
covered workers.
10. Complying with Convention No. 103’s requirement to replace employer liability with social
insurance or public funding presents a more complex challenge. If the country wishes to
prioritize compliance, the most feasible option is to extend the ETF system to provide
maternity cash benefits to covered workers, with funding by a compulsory 1% payroll levy, to
be collected from employers alongside the current ETF contribution. A 1% levy would be
adequate to provide the enhanced level of maternity benefits required by ILO Convention
No. 103 (and also by ILO Convention No. 183), as well as one week’s paternity leave for all
births. This would represent a form of social insurance and would meet the compliance
requirements of Convention No. 103.
11. The alternative to the proposed extension of the existing ETF mechanism is to establish a
new social insurance agency solely for the purposes of providing maternity benefit
insurance. We do not recommend this option or find it feasible. There is neither consensus
of social partners nor any social partner strongly in support of this option. The start–up costs
will be large, the country lacks any relevant technical expertise to operate such an agency
effectively, and its establishment would entail major changes from established practices and
approaches in Sri Lanka. In addition and more importantly, establishment of such an agency
would require the establishment of new governance arrangements, and which would be
difficult to design in a way that ensures the confidence and trust of all social partners.
12. Although introducing a maternity benefit insurance scheme as an extension to the current
ETF scheme is technically feasible, its political and social feasibility is uncertain, as there is
no consensus amongst social partners in favor of this approach, whilst many social partners
also favor and are more concerned with moving towards ratification of ILO Convention No.
183. If the government takes unilateral action without such consensus to amend the ETF
legislation as required to achieve compliance with Convention No. 103, recent experience
indicates that there is a real risk of significant social and political opposition, leading to
disruption of social harmony. Use of the government’s political capital in this way also
carries a significant risk that it will make it more difficult in the medium term to improve the
level of maternity benefits coverage to the levels required by Convention No. 183, as many
stakeholders currently prefer.
13. The technical, institutional and political feasibility of the ETF approach would be significantly
improved, if it is done in combination and simultaneously with other proposed changes to
extend ETF to provide employment injury compensation. Such a combined package of
reforms would require only one Act of Parliament, would achieve significant economies of
scale and scope in establishing new systems at ETF, and would help distribute costs more
evenly across firms as the firm risks of maternity leave costs and employment injury
compensation are distributed differently.
14. The experience of other similar countries is relevant to assessing the issue of feasibility. We
find that no other Asian country with a similar employment legislation context to Sri Lanka’s
and with a similar history of lacking any social insurance systems has made such a change
from employer liability to social insurance financing in the area of maternity benefits
financing. Relevant economies that have not made such a change include Malaysia, Hong
Kong and Singapore. The most comparable and relevant experience is Malaysia, whose
SOCSO scheme – equivalent to Sri Lanka’s ETF – already provides employment injury
insurance benefits. However, strong stakeholder opposition has prevented the expansion of
SOCSO to provide maternity benefit insurance, although Malaysia has not ratified
Convention No. 103 and therefore is under no obligation to do so. There are significant
constraints that make it difficult for countries to make this type of change, both institutional
and political. For countries with no established social insurance system, the evidence clearly
indicates that the transition costs of making this change solely for maternity benefits are high
and often an almost insuperable barrier to change.
15. To expand maternity benefits coverage to informal sector workers in Sri Lanka, there is no
alternative to using public funds. An ETF–based contributory system does create options for
allowing voluntary enrolment by such workers, but global experience demonstrates that
such an approach will not achieve high levels of coverage. For this reason, countries like
Singapore have had to resort to public funds to expand coverage to these types of workers.
16. Several social partners advised that an alternative strategy for tackling the problem of
complying with Convention No. 103 is to ratify the newer Convention No. 183. Government
counterparts have expressed interest in this option, and requested that we provide our
observations. We note that Convention No. 183 was expressly introduced to make it easier
for countries, such as Sri Lanka, to achieve compliance, by allowing existing employer
liability arrangements to be retained, whilst setting out a more ambitious set of targets in
terms of population coverage and depth of benefits. Other than resolving the issue of
compliance with the prohibition against use of employer liability financing, this step would
also frame Sri Lanka’s targets using a more up–to–date framework. In event that Sri Lanka
chose to ratify Convention No. 183, the country would need immediately to amend existing
legislation to (a) increase maternity benefits to a minimum of 14 weeks (98 calendar days)
for all covered workers, and (b) notify ILO that it intends to cover other workers in a staged
and progressive manner. The first of these steps are consistent with what social partners
currently support. The second allows the country to expand coverage in steps as resources

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