The Ministry of Labour has recently sounded the alarm over a staggering Rs. 35 billion in unpaid Employees’ Provident Fund (EPF) contributions by 22,450 companies, some of which include prominent State institutions.
The revelations, announced by Deputy Minister of Labour Mahinda Jayasinghe, have spurred a flurry of questions from the public and stakeholders about accountability, enforcement, and the path forward.
Speaking to the media, Jayasinghe noted: “The Labour Department has informed us that 22,450 companies have not paid EPF amounting to Rs. 35 billion. We investigated this and found out that some of these companies are now closed.” He added that the companies ranged in size, with some employing only two or three workers, while others had a workforce exceeding a hundred.
Among the defaulters is the Sri Lanka Transport Board (SLTB), a State-Owned Enterprise, which has failed to meet its EPF obligations. Jayasinghe emphasised the urgency of the situation, stating: “We do not know how many people in the workforce have been affected, because the information we received does not suggest such an amount.”
The issue has persisted for years, but what sets this administration apart, according to Jayasinghe, is a renewed political will to act. “We have now taken this information and we have revealed it to the public because we wish to take action,” he said in response to a question on persistent Government neglect of the issue.
Step-by-step action plan
The Labour Ministry has already begun issuing warnings. Jayasinghe said: “We had our review meeting on Thursday (29) and we analysed how many of these companies have been warned before on the EPF matter, as well as how much time has elapsed since the warning has been given.”
Companies are first issued a formal notice detailing the arrears. “In the first instance, we issue a warning in writing. We inform them of the pending amount and say that such an amount has to be paid as EPF.”
While some employers have responded to these warnings by proposing payment plans, others have ignored them entirely. “Some companies approached us and stated that they are unable to settle the full amount in one payment and requested for a certain timeframe to make the remaining payments. We could give them some form of relief,” Jayasinghe said, noting that many had been financially destabilised during the Covid-19 pandemic.
The Government’s strategy moving forward is to segment the process. “We cannot charge all 22,450 companies all at once,” he said. “So first we will be issuing a warning and observing how many are complying.”
Jayasinghe added that companies that had shut down were more complex cases. “We cannot charge from the companies that have closed down, because they have already closed down and recovery would be a legal matter. However, at a later stage we will be recovering from companies that are currently closed as well.”
Tougher stance against defaulters
When asked about companies that could pay but choose not to, Jayasinghe struck a firm tone. “We will issue a warning and if they do not comply, we will initiate legal action against those companies. They also should realise that they cannot play around like they did with previous governments.”
“Previous governments made deals with these companies, but they cannot make deals with our Government. They will have to comply with the law. If not, they will have to face the law,” he asserted.
The consequences, however, will not necessarily include shutting down companies. “The companies won’t have to be closed down, but instead, the courts may choose to impose a fine,” Jayasinghe clarified.
Labour Dept.’s enforcement mechanism
Further insight into the enforcement process was provided by Labour Department Commissioner General Nadeeka Wataliyadda.
When questioned on whether the fault lay with the Labour Department for being so inactive as to allow over 22,000 companies to evade EPF payments, she said: “We have identified the 22,450 companies that have not paid EPF because we want to take action. We will write to these companies and state that a pending balance has to be paid, and that such a payment has to be made within a certain period of time,” she said.
She detailed a multi-step notification system: “Usually these payments are not paid in a single payment, so if there is still a pending balance, then we send a notice to them. We send them the First Notice, followed by the Second Notice, and if they still do not comply, we issue a Red Notice. Should they still fail to pay, then we initiate legal action against these companies.”
Even after legal proceedings, enforcement remains a lengthy process. “When we take these companies to court, sometimes the courts allow them to make payments in instalments, especially if a company is unable to make payments in a lump sum. In some instances, the courts allow 6-7 years worth of instalments to make the pending payments,” she noted.
“Among these 22,450 companies, you will find companies in a variety of stages and some have already been taken to court and are still making payments.”
Investigations and inspections
Wataliyadda rejected claims that the Labour Department had been dormant in identifying these defaults. “We have performed inspections of 95,000 companies just in the past year. Therefore it cannot be said that the Labour Department has not performed its duties.”
She explained that the department relied on both internal inspections and public complaints. “It is because of these duties we have performed that we have such a large figure. However, our work alone will not reveal details. Sometimes, if people have suffered because the payments are wrong or if they have not been paid, then they should make a complaint and we will study the issue.”
The Labour Department has created multiple avenues for workers to report discrepancies. “We have also opened paths for people to make complaints. They can make complaints online via the Complaints Management System of the Labour Department website,” Wataliyadda said.
In addition, a wide network of offices has been established islandwide for in-person complaints. “We have opened up 40 district offices, 15 sub-labour offices, and 11 zonal labour departments with the Head Office situated in Narahenpita. A member of the workforce can bring their grievances to any of these offices and make a complaint and the relevant officers of the Labour Department will conduct an inspection. If there are any lapses, they will ensure that the requisite payment is made,” she said.
Systemic negligence and structural failures
Commercial and Industrial Workers Union (CIWU) President and Attorney-at-Law Swastika Arulingam delivered a critique of systemic negligence and institutional complicity. “We have known about these defaults for years. So many complaints have been made. Workers have filed complaints with the Labour Department, but nothing has happened. No action was taken.
“Now all of a sudden the Minister says that there are over 22,000 companies with Rs. 35 billion in EPF unpaid. This is not new information. This is information that has been there and the Labour Department has done nothing about it.”
Arulingam pointed to the lack of transparency and accountability within public institutions. “Every time workers went to the Labour Department, they were told that the company will make the payment soon, or they were told not to fight. They were intimidated.”
She explained that if EPF had not been paid, it was highly likely that Employees’ Trust Fund (ETF) payments had also not been made. The consequences of this are severe, since when a worker leaves their job, there may be no official record that they were ever employed at that workplace.
“This is not just about inefficiency; it’s also about direct complicity in many instances. The Labour Department, especially at the regional level, is often in cahoots with employers. I’m not saying all officers are complicit, but the pattern is clear.”
Under-resourced and under-trained
When asked what she meant by the Labour Department being “under-resourced,” Arulingam elaborated: “The department has the legal power to inspect workplaces, check employment conditions, and audit employee records. But to do that effectively, it needs enough officers, trained staff, and a solid inspection framework. If one officer has to cover dozens or hundreds of companies, it’s impossible to enforce compliance.”
She stressed that resourcing did not just mean numbers; it also includes adequate training and support. Without that, she argued, even existing officers are unable to function effectively and corruption begins to seep in.
“Unions have long highlighted how regional labour officers often look the other way. We may not have proof of bribes, but their inaction speaks volumes. For example, when we report unfair labour practices, it often takes months or even years for a proper investigation to be conducted.”
According to Arulingam, the system places the burden unfairly on workers to initiate complaints, despite the risks involved. “Workers are scared. When we speak to them and find out their EPF hasn’t been paid, we tell them to file a complaint. But they’re afraid they’ll be fired if they do. And in most cases, they’re right. There is no meaningful legal protection for whistleblowers in the workplace.”
She argued that this was why the Labour Department must act proactively. “You cannot wait for workers to walk in and complain. That’s not realistic in our context. The department must go into workplaces, inspect documents, talk to employees confidentially, and ensure EPF and ETF payments are being made.”
What can be done?
Asked about possible solutions, Arulingam outlined several urgent steps. Firstly, she emphasised the need to expand the Labour Department’s workforce, arguing that increasing the number of officers and thereby reducing the ratio of officers to companies would significantly improve enforcement.
Secondly, she advocated for the establishment of an independent whistleblower mechanism that allows workers to report violations safely and anonymously, without fear of employer retaliation.
Thirdly, Arulingam called for stronger anti-corruption measures within the department, stating that officers who failed to act on clear violations must be investigated and held accountable. Lastly, she stressed the importance of proactive enforcement through mandatory inspections, recommending that each officer be required to conduct a set number of inspections per month, complete with audit trails detailing what was checked and what follow-up actions were taken.
On legal action and criminal liability
Arulingam noted that failure to pay EPF was a criminal offence under Sri Lankan law. “The Labour Department has the power to initiate action against employers in the magistrate’s court. The directors of the offending company are held personally liable, and if they fail to pay even after court proceedings, it can result in penal consequences including imprisonment,” she said.
However, she noted that the law was rarely enforced. “The legislation is strong, but the problem is implementation. These legal tools exist but are either not used or are deliberately stalled.”
When asked if civil society or workers could initiate legal action, she said it was possible, but extremely difficult. “Technically, if the Labour Department fails to act, a worker can take legal action against the department for dereliction of duty. But realistically, once a worker complains, they’re usually fired. So it’s rare for them to pursue a legal battle, especially when the odds are stacked against them.”
Way forward
Deputy Minister Jayasinghe and Labour Commissioner General Wataliyadda both emphasised that recovery of dues would be prioritised according to the operational status of companies and the gravity of the non-compliance.
“We will first identify which of these companies are currently functioning because we can recover these amounts from them,” said Jayasinghe. “Once we have identified the status of these companies and after the issuance of the first warning, we will decide how to proceed with the next form of action.”
While he emphasised that the EPF system must be protected to ensure the dignity and security of workers, he was also mindful of the broader economic context. “Some of these companies faced a severe financial collapse during the economic collapse in the aftermath of the Covid pandemic,” Jayasinghe acknowledged. “These are understandable reasons, so we have agreed to provide them some relief.”