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Circular Number: C-109
Amendments made in Eight Labour Laws through the Finance Bill 2006 – 7.
Several amendments have been made in various Labour Laws through the Finance Bill which has been passed by the Parliament and with the assent of the President becomes law applicable from the Ist July, 2006. Our comments and views on important aspects of the same are given as under:-
I Amendment in the Workmen’s Compensation Act, 1923
In the Schedule IV to the Act Rs. 3,000/= has been raised to Rs. 6,000/= p.m. to extend application of the Act to the workers getting wages upto Rs. 6,000/= p.m. but missed to amend Section 2 (1) (n) (ii) of the Act which still contains the limit of wages not exceeding Rs. 3,000/= p.m. to be a workman.
II Amendments in the Factories Act, 1934
1- In Section 38 the limit of the spread over of 10½ hrs for others and 11½ hrs in case of seasonal factories have been raised to 12 hrs for the both
2- In Section 45 (1) (b) after the word “provided” the word “further” be inserted and before it a new proviso has been added as under:
“Provided that if the employer arranges for the transport facilities, the women may work up to 10 p.m. in two shifts”.
This would have mixed reaction from different sides. It may increase employment of women. Transport provided to women workers by the employer may drop at fixed points and not at their house door steps and walking from there to their houses during night may create problem of safety / security to them.
III The Minimum Wage of Rs. 4,000/= p.m. under the Minimum Wages for Unskilled Worker Ordinance, 1969
1 By amending the Column 2 of the Schedule to the Ordinance the rate of the minimum wages of Rs. 3,000/= p.m. for Unskilled Workers has been revised and raised to Rs. 4,000/= p.m. for all areas.
2 The Ordinance and the amendment apply to all industrial and commercial establishments irrespective of the number of workers employed. Now Rs.4,000/= p.m. is the National Minimum Wage for the lowest category of workers in Pakistan.
3 The deductions from the minimum wages for providing housing accommodation and transport by employers have once again not been revised.
4 The “wages” has been defined in Section 2(g) of the Ordinance. The minimum wages includes basic wage, any dearness allowance, house rent, house rent allowance, conveyance allowance, statutory cost of living allowances admissible till the date of amendment, Statutory Special allowances admissible till the date of amendment and any other fixed allowance but does not include traveling allowance, gratuity and bonus. The Ordinance or the amendment does not change the system of wages paid by the employer. Taken all together should make the gross of Rs. 4,000/- p.m. but the allowances are not merged with the basic wage and shall continue to remain separate as before where the same are so paid separately. Naturally wages of semi – skilled and skilled workers are to be fixed by the employers of their own more than Rs. 4,000/= p.m.
5 The above wages are the minimum wages. If the minimum wages for the unskilled workers in any commercial or industrial establishment is more than the minimum wage now fixed at Rs. 4,000/- p.m., the same shall continue and cannot be reduced. This minimum wage is now the starting minimum wages for the unskilled workers. Future increases, annual increments, increases under settlements, statutory Cost of Living allowance, statutory Special allowance etc. which may be given in future would be in addition and over and above this minimum wage. Apprentices are not included as unskilled workers who are governed by the Apprenticeship Ordinance, 1962.
6 This minimum wage for unskilled workers is for all unskilled workers whether they are permanent, temporary, badli, monthly rated, piece rate or daily wage rated. For daily wage rate, the daily wage may be arrived at by dividing 4,000 by 26. Normally piece rated workers are above the unskilled workers except certain manual labour on piece rate such as loading and unloading of goods and in such a case the piece rate for unskilled workers be so fixed that such a worker gets normally Rs. 4,000/- p.m. wages.
7 Please note that this new minimum wage shall have relative effect on the contributions payable under the Social Security Scheme, E.O.B., Statutory gratuity and any other benefit given under law or rules linked with wages of the workers.
IV Amendments in E.O.B. Act, 1976
1 In section 1 (4) (i) the word “or” at the end shall be omitted and substituted by semi-Colon and thereafter the following proviso shall be added:
“Provided that for the industry or establishment set up on or after first day of July, 2006 the number of persons shall be enhanced from “ten” to “twenty”.
This raising of the limit intends to give incentive to new units but the previous limit for others remain unchanged.
2 In section 1 (4) (ia) the word “ten” shall be substituted by “twenty”
3 In the schedule to the Act in its para (2) in the Proviso the old age pension or invalidity pension has been raised from Rs. 1,000/= p.m. to Rs. 1,300/=p.m. from 1st July, 2006. With raising of the minimum wage to Rs. 4,000/= p.m. contributions to the Institution would be increased by 33% increasing substantially funds of the Institution. In the budget speech Rs. 3,000/= p.m. pension was mentioned which also appeared in the national newspapers. Be as it may, the law prevails over any statement.
V Amendments in the W.P. Industrial & Commercial Employment (Standing Orders) Ordinance, 1968
i) In the Schedule to the Ordinance i.e. Standing Orders in S.O. 1 (a) after its sub-clause (5) a new sub-clause “(6) Contract worker” has been added.
ii) And after its sub-clause (f) a new sub-clause (g) has been added as under:
“(g) A” Contract worker “ is a workman who works on contract basis”.
It is not understood as what is intended to be achieved by this as every worker works under employment contract be it verbal, employment contract created by appointment letter or employment contract establishment by a written contract of employment.
VI Amendments in the Companies Profits (Workers Participation) Act 1968
1- Section 2 clause (f) has been substituted by a new clause (f) as under :
“(f)” Worker” in relation to a company means an employee who falls within the definition of a worker as defined in clause (x x x) of section 2 of the Industrial Relations Ordinance 2002 (XCI of 2002) and has been in employment of the company for a period not less than six months”
Here the wage limit for coverage has been removed from definition of worker but the limit has been shifted to maximum of Rupees Ten Thousand p.m. in the new categories given under paragraph 4 (a) in the Schedule to the Act. So far all categories of employees falling within the wages limit were eligible to the benefit and now only workers under IRO, 2002 would be eligible and other categories of employees above the workers who also contribute to the profits have been excluded from the benefits. It would be fair to include all categories of employees for the benefits as they all contribute to the profits and in fact contribution of higher categories of employees in the management cadre in the profits is comparatively more than the workers as it is the management which makes or breaks a company.
2- After Section 5 (4) a new sub-section (5) has been added as under:
“(5) Notwithstanding anything contained in this Act or the scheme, if any defaulting employer strictly complies with the provisions of section 3 and distributes the benefits in accordance with paragraph 4 of the scheme for the period of default on or before the date fixed by the Federal Government, no such penalty shall be imposed and the company shall not be liable to pay interest as provided in paragraph 2 of the scheme.”
3- In its Scheme being the Schedule in paragraph (1) (iii) full stop at the end is substituted by a colon and thereafter a Proviso is added as under:
“Provided that for the companies established on or after 1st day of July 2006,–
(a) Clause (ii) shall have effect as if for the figure and word “20 lacs” the figure and word “5 million” were substituted, and
(b) Clause (iii) shall have effect as if for the figure and word “40 lacs” the figure and word “20 million” were substituted”.
The limits of the value for application of the Scheme for new companies have been raised.
4- In paragraph 4 (a) of the Schedule the previous three categories have been substituted by new categories as under:
i- Workers drawing average monthly wages not exceeding five thousand rupees.
ii- Workers drawing average monthly wages exceeding five thousand rupees but not exceeding seven thousand five hundred rupees.
iii- Workers drawing average monthly wages exceeding seven thousand five hundred but not exceeding ten thousand rupees.”
Thus the previous wages limit as contained previously in Section 2 (f) has still been shifted in the third category above.
5- In paragraph 4 (d) the words “rupees three thousand” have been substituted by the words” the amount of three times of the minimum wages for unskilled workers as given in the schedule of Minimum Wages for Unskilled Workers Ordinance, 1969”
Some old book of the Act has been referred to while amending as Rs. 3,000/= in it was changed to Rs. 6,000/= by the amendment on 6-10-2001.
However this increase is a welcome beneficial change for the workers. Please note that the word company under the Act also includes other establishments notified under the Act.
VII- Amendments made in the W.P. Shops and Establishment Ordinance, 1969
1- Section 6 (1) – including its sub-section (a) & (b) – has been substituted by a new sub-clause as under:
“(1) Except as otherwise provided in this Ordinance every person employed in any establishment shall, in addition to the leave and holidays as may be admissible to him under sections 14, 15 and 16 be allowed as holiday, one day in each week.”
This amendment was not necessary as Section 6 (1) ( b ) already contained such provision.
2- Section 6 (4) has been omitted and now employer can close his establishment on any day of the week and intimate the same to the prescribed authority.
3- In section 8 in the Proviso the words “one hundred and fifty” have been substituted by the words “Six hundred and twenty four” and the words “one hundred” have been substituted by the words “four hundred and sixty eight”.
By the above the limits of overtime work in a year have been increased for both adult workers and young persons which may have mixed comments from different quarters.
4- In section 9 at the end full stop is substituted by a colon and thereafter the following proviso has been added.
“Provided that no such over–time shall be payable to contract workers in receipt of wages being calculated on piece rate basis”
Only normal piece rate wages would be payable to such workers during over-time. What about the other non-contract workers in direct and regular employment of the employer on piece rate basis?
5- Section 10 has been substituted by new Section 10 as under:
“10. Spread-over.- The period of work of an adult and young person shall be so arranged that inclusive of the interval for rest or meals under section 7, it shall not spread-over more than twelve hours in the case of adult and nine hours in the case of young person:
Provided that the total period so worked out, in case of an adult worker, shall not exceed sixty hour and by a young person fifty-four hours in a week.”
Note:- As repeated earlier by us, it would have been simple and better to remove the words “West Pakistan” from the title of this Ordinance and so also from the W. P. Industrial & Commercial Employment (Standing Orders) Ordinance, 1968 which have now become misnomer.
VIII- Amendments in the Workers Welfare Fund Ordinance, 1971
1- For the words “Income Tax Office” wherever occurring the words “Taxation Office” shall be substituted.
2- ( i ) In section 2 (b) and ( j ) “1969 (XXIII of 1969” have been substituted by “2002 (XCI of 2002” i.e, IRO, 2002.
(ii) It’s clause (e) has been omitted.
(iii) Clause (f) (iii) has been substituted by “(iii) any concern running a public service transport”.
(iv) In clause (ff) “1979 (XXXI of 1979” has been substituted by “2001 (XLIX of 2001”.
(v) After Clause (h) a new clause (ha) has been added as under:-
“(ha)” Taxation Officer” means a person appointed to be a Taxation Officer under the Ordinance and includes a Commissioner as defined in Clause (13) A of Section 2 of the Ordinance”
(vi) For clause (i) the following shall be substituted
“(i) (i) “total income means: Where return to Income is required to be filed under this Ordinance, the profit (before taxation or provision for taxation) as per accounts or the declared income as per the return of income, whichever is higher; and.
(ii) Where return of Income is not required to be filed, the profit (before taxation or provision for taxation) as per accounts or four percent of the receipt as per the statement filed under section 115 of the Ordinance, whichever is higher.”
3- (i) In section 4 (1) for the word “one” the word “five” has been substituted and the words “or would have been so assessable but for the exemption made by section 48 thereof.” have been omitted.
The limit of the total income of Rs one lakh has been enhanced to Rs. 5 lakh for liability of the establishment to make payment to the Fund.
(ii) It’s sub-section (3) has been substituted as under:-
“(3) The industrial establishment shall on or before the date prescribed for filing of returns of income or a statement under the relevant provision of the Ordinance, pay the amount due from it under sub-section (1) and furnish the proof of payment to the Taxation Officer or the Commissioner as the case may be.”
(iii) In its sub-section (8) the word “equal to eighty (*eight) percent per annum of the amount due from it from the date on which it was originally payable to the date on which it is paid” have been substituted by the words “as per provision of the Ordinance, relating to the mode and time of recovery of the Income Tax.”
(iv) After subsection 9, subsection (10) shall be inserted as under:-
“(10) Industrial establishment may file an appeal against any order passed by Taxation Officer of (*or) the Commissioner as the case may be under this Ordinance before the Commissioner (Appeal) appointed under the Ordinance.”
4- Section 6 (e) has been substituted by new clause “(e) investment in government, government guarantees, non government securities and Rea Estate.”
5- (i) Section 10 (c) has been substituted by clause “(c) investment in government, government guarantees, non government securities and read estate.”
(ii) After Clause (c) a new clause (ca) is added as under:
“(ca) to dispose of the moveable and immoveable property of Workers Welfare Fund and Workers Welfare Boards.”
6- After section 15 a new section 16 has been added as under:
“16- Exemption from taxes: Notwithstanding anything contained in any other law, the Federal Government may, by order in writing, exempt the Institution from any tax, duty, or rate leviable by the Federal Government or by a local authority under the control of the Federal Government.”
7- The above are mostly legal / technical amendments about collection of the fund. The Minister announced several other benefits for the workers under the Workers Welfare Fund Ordinance such as stipend of Rs, 1,000/= for children of workers, special death grant of Rs. 2 lacs and marriage grant of Rs. 50,000/= for marriage of daughters but the above amendments do not include the same or the same are given in any annexure to the Bill? Be as it may unless the same are incorporated and made part of the law, those would be only promises which may be fulfilled or not, who knows?
Note:- The amendments in the above eight labour laws have been included in the Finance Bill as a short cut when except a few, the others cannot be said to have finance matter and could not be part of the Bill. In the Parliament usually the budget proposals of finance are debated and such amendments are automatically stand passed with passing of the Finance Bill. In fact comment were sought and obtained by the Federal Govt. on the proposed Bill No. 20/2005 namely the Labour Laws (Amendment) Act, 2005 for amending the Workmen’s Compensation Act, 1923, the Factories Act, 1934, the Standing Orders Ordinance, 1968 and the Shops & Establishment Ordinance, 1969 but instead the same have been included in the Finance Bill. Since these amendments in the labour laws have much importance, instead of adopting this method, it would have been proper if these amendments were made through separate and normal legal procedure of amendments
N.B. The above comments are based on the amendments in the above laws as proposed in the Finance Bill.
The above may be carefully read and understood. In case of any doubt, you may consult us or your own consultant. This Circular is also available on our above website.
For M/s S. M. Yaqoob