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Pro-workers laws, insensitive legislators

Dr. Ikramul Haq

Significant pro-labour reforms were introduced by the Government of Zulfikar Ali Bhutto as early as in 1972 in the wake of threadbare discussions at a Tripartite Labour Conference held at Islamabad. Many laws were introduced and steps were taken to guarantee to the workers their long overdue fundamental rights of freedom of association and collective bargaining, and assurance of greater security of service, representation in management, group-insurance, old age pension, free education for children and housing and medical facilities etc. Some beneficial laws, for example, Workers Welfare Fund Ordinance, 1971, framed by Pakistan People Party and later amended from time to time by various governments, after the Eighteenth Constitution Amendment (18th Amendment), are is disarray—partly because of contradictory judgements of the higher courts and party because of inactions on the part of federal and provincial legislators to provide remedial actions highlighted in judicial pronouncements.

On October 10, 2018, the Federal Minister for Inter Provincial Coordination Dr Fehmida Mirza chaired a meeting on resolution of post 18th amendment, issues of Employees Old Age Benefits Institute and Workers Welfare Fund on Tuesday. Minister for Overseas Pakistanis & Human Resource Development Syed Zulfiqar Bukhari also attended the meeting, in which representatives of Employer’ Federation of Pakistan and Pakistan Workers Federation from the provinces and Islamabad attended the meeting and discussed, in detail, the issues faced by the Workers Welfare Fund and EOBI after the 18th amendment.

“We are not against devolution or provincial autonomy but we need the welfare of our workers,” they asserted. They highlighted the view that social security net should not be distributed among the states; rather it should be managed through the centre and implemented by the provinces. The trans-provincial fund, assets, institutions and the programs run by EOBI and Workers Welfare Fund are difficult to be divided among the provinces. Besides, the migration of the workers would be a big challenge, if the subject considered is to be devolved, the welfare of the workers would be affected, the Federal Minister said that the workers are the main stakeholders in this and the due importance must be given to their view point as well.

She directed the participants to formulate their strategy and submit their point of view in a documented form. “We believe in cooperative federalism, we need to strengthen each other, the government is committed to devise a mechanism based on consensus, to ensure the welfare of the workers.” The representative of workers thanked the Minister for providing them with the opportunity to bring forward their view point, while the next meeting in this regard will be scheduled soon”.

No doubt the final decision of the Supreme Court created confusion, problems and controversies which require the provincial Governments (as now labour is the provincial subject by the 18th Amendment of the Constitution) to move fast and take proper legislative steps to correct the situation created by the Federal Govt. through Finance Acts in violation of the Constitution of Pakistan. The courts are bound to give decisions only according to the law and the Constitution.

In view of the Supreme Court judgement, the possibility of employers instituting petitions before courts claiming arrears of contributions/ payments made in excess cannot be ruled out. It also provides opportunity to provincial governments to restore to the workers benefits lost on account of judgement dated Feb 26, 2011 of the Sindh High Court, by following the correct legislative process. In this respect, the federal government will also be required to transfer funds generated under the Companies Profits (Workers’ Participation) Fund Act, and the Workers’ Welfare Fund Ordinance, to the respective provincial governments, as per devolution principles.

The Lahore High Court held that the “impugned amendments introduced in WWF Ordinance through Finance Acts, 2006 and 2008 are unconstitutional and therefore struck down”. The discussion above that the subject contributions/payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill, i.e. the Finance Acts of 2006 and 2008, as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution

The Supreme Court’s verdict of November 10, 2016 by which all the ordinances in respect of Employees Old-age Benefits Institution Act 1976, Workers Welfare Fund ordinance 1971 and Ordinance 1968 etc were annulled as unlawful. The apex court held that no amendment was legally made after the contributions in question were declared as fee and not tax. Hence the application of those amendments would cease unless further legislation is made through the parliament.

At present there are approximately 0.5 million pensioners under EOBI and some five million workers of various categories including women are registered for contributions.

The biggest handicap of the EOBI is that it is mostly headed and run by the officers appointed by the federal government who usually have little or no background of the working in a workers welfare institution. One of the outgoing chairmen, Zafar Iqbal Gondal was found in gross financial irregularities during PPP rule and is in jail while the just transferred Saleh Muhammad Farooqi worked part time as he being a favourite of PM also worked as chairman of implementation of Green bus project of Karachi. Race is on for replacing him and a number of candidates of the federal bureaucracy are vying for the coveted post.

Interestingly an official Raja Faizul Hasan Faiz who was labour adviser during PPP rule advised the institution on making amendments to deprive the poor private sector workers of their rights through finance bills and instead of being reprimanded for the same he has been elevated to legal consultant in Federal Ombudsman’s cell.

There is an inbuilt anomaly in the EOBI in working out contributions of the concerned organization along with the incumbent as well as pensions as it has adopted the minimum wage as benchmark as against the old age pensioners of the government whose contributions are worked out on basis of their progressive salary slabs and their pensions are paid according to their last pay. By this the private organizations’ workers who are working in different categories from lowest to the highest slabs are paid the same lowest rated pensions which make it meaningless for the higher salaried men and women.

 Before the 18th Amendment into the constitution in 2010, the Federal Board of Revenue (FBR) had the legal power to collect WPPF from across the country. After the amendment, the powers were, however, delegated to the provinces and presently the provincial governments are allowed to collect WPPF. Sindh is the first province to introduce a legislation to collect WPPF and get the Act of 2015 enacted. According to the high court order, the Sindh Companies Profits (Workers’ Participation) Act of 2015 will apply to all trans-provincial companies employing a total of 100 or more workers at any time of the year, and operating across the country irrespective of the regional location of their registrations.

Of the payment made by a company’s total profits, only such percentage of the distributive profits as is proportionate to firm’s workforce in Sindh will go to the WPPF, no matter the number of its workers in the province is below or more than 100.

Sindh WPPF Act 2015 applies to all the companies in the province regardless of where their registered office or industrial premises are located. So, if a company’s registered office is in Lahore and its manufacturing premises are in Peshawar but if it has any kind of presence in Sindh the Act 2015 allows the province to collect the levy.

SHC also removed a confusion of applicability of rates under the WPPF. In its order, the court said the purpose of WPPF was the welfare of labour and there were no problems applying it to all the workers of a company throughout Pakistan. It retained this character on the commencement of the present constitution and up to the 18th amendment (from 1973 to 2010).

“The Act thereafter ‘fractured’ into provincial legislation and was then replaced by the Sindh Act,” the court order said.

The Sindh WPPF Act 2015 bounds companies to make a proportionate distribution of 5 percent of their profits to their workers in the province. The five percent of profits will be calculated on the total profits of the company and not just those arising out of its operations from Sindh.

The SRB official said the provincial revenue authority was mandated to collect the amount from corporate and industrial units operating within the jurisdiction of the province or their offices or officers working in any other province or within the jurisdiction of federal government.

The consolidation and rationalization of the laws relating to labour welfare and social insurance however will require further policy decision in as much as to whether labour welfare and social insurance institutions like EOBI, PESSI’s, WWF etc. will be federalized, provincialised or disinvested. Despite criticism from certain quarters these welfare organizations have played an important role in providing to the labour a suitable social safety net and so these are required to be kept in place but should also be further strengthened. What is needed is to introduce a comprehensive social insurance and social security scheme for the society at large on the lines such schemes are in vogue in other welfare states. It would in any way be desirable to ensure that restructuring of labour laws does not create any problem for the industry. Restructuring should, therefore, be gradual, fully considered and rationally done.

Technology is undergoing a rapid change. Pressure of globalization is increasing day by day. Investor has his own priorities. Management style is changing. Unions are expected to play more constructive role. There are indigenous needs. There are external pressures due to international commitments. Communication is increasing. Industrial relation systems of the world are undergoing change. Out-dated labour laws, multiple in number, ought to undergo considerable change to resolve genuine problems of workers and the industry. The government’s current Labour Policy and its commitment to the consolidation, simplification and rationalization of labour laws is very timely.

The following are some of the suggestions:

* Law on industrial relations has already been thoroughly revised in consultation with all stakeholders. What is required is to invoke its bipartite and participative character more vigorously to foster trust relationship between employers and employees.

* The law on wages should state determination of wage system by the organization concerned in consultation with workers or through collective bargaining. The government power should better remain confined to fixation of wages of workers in small and unorganized sector. Authority must, however, be appointed to ensure timely payment of wages without any unauthorized deductions.

*The law on conditions of employment should apply to all employment sectors laying down minimum standards and basic principles to deal with employment matters. The right to determine service benefits should rest with the organization concerned according to its objective conditions and economic viability.

* The Factories Act, the Mines Act, the Shops and Establishment Ordinance, the Railways Act (Chapter VI-A),the Workmen Compensation Act and every law with relevant provisions be consolidated in the shape of a generic law to be named as law on occupational safety and health which should apply to all economic sectors. General principles and standards should be laid down in the enacting part and industrywise regulations should be appended according to their needs and requirements. The appointment of judicial authority to award compensation in case of accidents and deaths should also be provided in the same law. This law should be fully in conformity with international labour standards. It would be advisable for Pakistan to ratify ILO Convention 155 in this regard. The subject of occupational safety and health needs to be given the highest priority to improve working environment and ensure safe working conditions in industry in Pakistan.

* Instead of having a law on HRD, which being a vast subject does not fit to the consolidation of certain labour laws in this regard, it would be proper to re-enact the law relating to apprenticeship to meet the present day requirements.

* An enabling provision be laid down in the law regarding conditions of employment requiring also companies, firms and industries to evolve their labour welfare and social insurance systems in consultation with their workers organizations. It would ultimately help to deal appropriately with laws relating to labour welfare and social security.

* Consolidation should be carried meaningfully by re-enacting laws coherently. The out-dated laws and the laws, which have lost their utility or usefulness, be repealed.

*Credit goes to the present government for breaking the ice in bringing a comprehensive labour policy after about thirty years, with the promise to restructure labour legislation on sound footings to meet not only the present time needs but also the challenges of globalization and changing technologies. The Ministry of Labour deserves appreciation for a job that has been accomplished.The late Mr Omar Asghar Khan, the former Federal Labour Minister, was able to prepare a way for the Labour Policy by holding 24th PTCL after 13 years and patronizing and supervising the initiatives of the ministry in this regard. His devotion to the cause of labour was unprecedented. A package of labour reforms announced during his time (April 30, 2001 ) was a prerequisite to the current labour policy.

 In the Industrial Relations Act, 2013 both the sectors’ workforces come under the definition of workers, but no rules of business have been chalked out to enable them to have their trade unions registered under the law. 


The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email:ikram@huzaimaikram.com; Twitter: @drikramulhaq.

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