Sri Lanka’s labour market remains subdued despite assertions of record vacancies

Firms seen eliminating roles, amalgamating some & replacing with lower grades to cut staffing cost

Sri Lanka’s labour market continues to remain a lot weaker defying even the nascent recovery seen in the economy while firms across almost all industries have either frozen or slowed down their hiring significantly despite widespread claims of them losing talent to foreign firms, particularly during the 
last two years.

The country saw more than 600,000 people leaving the country during the last two years – 311,056 in 2022 and 297,56 in 2023 – looking for greener pastures elsewhere when the country fell into its worst economic crisis in 2022.

Since then almost all industries started claiming that they are losing their key talent and their key executives during their every communication often cited losing people as one of their leading challenges facing the business.
But instead of these companies starting to hire for those positions left vacant by their former employees, they began eliminating some roles altogether, and started amalgamating many with other roles and hired much less cadre and only at lower grades than what they used to be.

According to recruitment and human resources consultants, they have seen this happening in almost all instances in the recent past as they claim they are not seeing as many people entering these companies as new hires compared to what these companies claimed to have been the case.

“They appear to be trying to replace who they had at lower grades and with less pay but with equal or higher qualifications”, said one recruitment consultant under condition of anonymity. “If this situation persists, there will be many more people leaving the country looking for better pay, better working and living conditions out of frustration”, he further said adding that this would aggravate the talent shortage in the country for even worse.

According to the monthly survey conducted by the Central Bank for the Purchasing Managers’ Index showed that firms in both the manufacturing and services sectors had been laying off staff in December last year.

Meanwhile the Labour Force Participation Rate (LFPR) which measures both the employed and unemployed but looking for work as a share of the working age population also stands at a low level of 48.8 percent.

In developed markets LFPR stands above the 60 percent levels reflecting the dynamism of the labour market.