The Government is to hold discussions with some stakeholders over the closure of the NEXT garment factory, in which over 1,400 workers lost their jobs, in the Free Trade Zone in Katunayake, today.
This was announced by Acting Labour Minister Mahinda Jayasinghe at the parliament yesterday. He said discussions would be held with factory administration, trade unions, and representatives of the Board of Investment (BOI) on the sudden decision of closing the factory.
Minister Jayasinghe said according to existing labour laws the factory authorities should have informed the Labour Department prior to their decision of closing down the factory but they had not adhered to this requirement until 20 May.
According to Jayasinghe, 2,825 employees are working in four sections of the NEXT factory, but 1,416 employees lost their jobs due to a decision taken by the factory authorities.
“ Meanwhile, 1,409 employees will retain their jobs. As soon as we got the information on this matter, the Labour Ministry and Labour Department promptly took this matter up and decided to meet some relevant parties to discuss the issue,” he said.
However, a communique issued by the NEXT factory, which had operated for over 40 years, stated that the sudden decision to close down the factory was due to high operational costs and continued financial losses.
Meanwhile, the employees who lost their jobs at the NEXT factory holding a press conference said that they were informed through a WhatsApp message on Monday night that the factory would close its operations, with immediate effect.
Below is the Full statement issued by the NEXT
NEXT Manufacturing Katunayake Production Plant to close
After much careful consideration, we are very sad to announce the immediate closure of the NEXT Manufacturing Katunayake Production Plant, Sri Lanka. This has been a very difficult decision for the Company and has been taken after exploring all alternative options.
At the heart of this decision is the increasingly high operating cost of the Katunayake Manufacturing Plant. For some years now, the plant has been unprofitable, and despite our considerable efforts to rectify the situation, we have been unable to make the factory economically viable. Recently, it has become clear that there is no prospect of this changing.
NEXT’s other SRI LANKAN operations to remain open
The Embellishment and Product Development Plants, which are also based in the Katunayake Free Trade Zone, will remain operational but with reduced numbers of employees (see table below for numbers involved).
NEXT other Manufacturing operations based in Andigama and Nawgaththegama (NMA 2, NMA 3 and NMA Cutting) will also continue to operate as usual.
For the removal of doubt, our Colombo sourcing office and operations will not be affected by this change.
Manufacturing Redundancies and Ongoing Workforce
Sadly, the closure will result in 1,416 redundancies overall
We would like to reassure our remaining colleagues that no further redundancies in Sri Lanka are planned or foreseen by NEXT Manufacturing.
Assistance for those affected
NEXT will be working to help those leaving the Company to find alternative local employment. To this end, we will be contacting other local production sites to help find alternative employment opportunities for those affected.
Severance arrangements
In recognition of NEXT Manufacturing history in Sri Lanka, the Company intends to meaningfully enhance the statutory severance package it will pay to those made redundant, this payment will be subject to an agreement being reached.
This means that employees who are made redundant will get a minimum of 2 months pay in addition to their other entitlements.
The table below shows the formula used to calculate the TEWA entitlement depending on the number of years service. The final column shows the proposed additional ex-gratia payment made for each service band.
Please note that TEWA payments are subject to a cap of 2.5m Sri Lankan Rupees.
In addition to the sums detailed in the table above, the following will be paid to those leaving:
1. Payment up to the last working day of May 2025, with no need for departing employees to attend between now and the end of May. This will be paid as usual on the due dates.
2. Payment of all outstanding Holiday Pay
3. Payment of all Production and Attendance Bonus (where applicable)
4. Payment of all Gratuity
Timing and process
Within the next few days, employees who are leaving will be informed of their situation, given details of the formal exit process and proposed timing of payments.
Finally
On a personal note I would like to add that I am very sad that we have had to make this decision after so many years of working with colleagues in Katunayake. I would like to take this opportunity to thank colleagues affected for their service to the Company over the years and wish them well for the future.
