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Date: 11-06-2007
Circular Number: C-112
Amendments made in Five Labour Laws through the Finance Bill 2007 – 8.
Amendments have been made in five Labour Laws through the Finance Bill 2007 – 8 which when passed by the Parliament with the assent of the President shall become law applicable from the Ist July, 2007. Our comments and views on important aspects of these amendments proposed in these laws by the Finance Bill are given below. It is likely that the same may be passed by the Parliament without any changes. However if any charges are made in the same while passing by the Parliament our comments given below shall stand modified accordingly which may please be noted:–
I- Amendments in the Workmen’s Compensation Act, 1923
1- Section 2 (n) (ii) the limit of Rs. 3000/= p.m. wage of workman has been removed and now the Act applies to the workers given in the List of the Schedule – II of the Act irrespective of their wages.
2- Column No. 1 of the wage limit in the Schedule IV to the Act has been omitted to achieve the above purpose.
II- Amendments in the W.P. Industrial & Commercial Employment (Standing Orders) Ordinance, 1968
i) In the Standing Order 12 (6) on gratuity a second proviso has been added as under:
“Provided further that if through collective bargaining the employer offers and contributes to an “Approved Pension Fund” as defined in the Income Tax Ordinance, 2001 (XLIX of 2001) and where the contribution of the employer is not less than fifty per cent of the limit prescribed in the aforesaid Ordinance, and to which the workman is also a contributor for the remaining fifty per cent or less, no gratuity shall be payable for the period during which such contribution has been made.”
By this new proviso beside the provident fund mentioned in its first proviso this statutory gratuity shall also not be payable for the period of such pension fund if there is a approved pension fund fulfilling the conditions of the above new second proviso.
ii) Please note that voluntary gratuity scheme of the employer over and above the provisions of the S. O. 12 (6) as amended shall not be affected and continue to apply as per its rules / conditions.
III- The Minimum Wage of Rs. 4,600/= 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. 4,000/= p.m. for Unskilled Workers has been revised and raised to Rs. 4,600/= p.m. for all areas w.e.f. 01-07-2007.
2 The Ordinance and the amendment apply to all industrial and commercial establishments irrespective of the number of workers employed. Now Rs.4,600/= p.m. is the new 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. 4,600/- p.m. but the allowances are not merged with the basic wage and shall continue to remain separate as before where the same are paid separately. Naturally wages of semi – skilled and skilled workers are to be fixed by the employers of their own more than Rs. 4,600/= p.m.
5 The above wages are the minimum wages for the unskilled workers. If the minimum wages for the unskilled workers in any commercial or industrial establishment is more than the minimum wage now fixed at Rs. 4,600/- 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 4,600 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. 4,600/- p.m. wages for working on all working days of the month or beside being present on other working days, he is on leave with pay on the remaining working days.
7 Please note that this new minimum wage shall have relative effect on the contributions payable under the Social Security Scheme except the fixed employers contribution of Rs. 210/= p.m. under Section 20 – A of the Ordinance opted for the Self-assessment Scheme which remains unchanged and so also the workers contribution of Rs. 20/= p.m. under it, contribution of E.O.B., Statutory gratuity and any other benefits given under law or rules linked with wages of the workers shall also have relative effect.
IV- Amendments in the Employees Old – Age Benefits Act, 1976
1- Please note that contribution under the Act is based not on actual wages but on fictitious wages i.e. the minimum wages fixed under the Minimum Wages for Unskilled Workers Ordinance, 1969 and under which the Rs. 4,000/= p.m. minimum wages has been now raised by 15 % to Rs. 4,600/= w.e.f. 01-07-2007. Now the employers contribution and the employees contribution have to be worked out on the wages earned in the month computed at the rate of Rs. 4,600/= p.m. wages.
2- In Section 22 – B for the words “equal to the minimum pension” wherever occurring the words “at the rate specified in the Schedule” have been substituted.
3- In the Schedule to the Act:-
(i) In the title after “22” a comma and “22 – B” shall be added.
(ii) In its paragraph (1) after the word “pension” occurring for the first time the words “and survivor’s pension payable to surviving spouse” have been inserted. This change is for good to clearly include pension for the surviving spouse of the insured employee and in the formula the word “Average” has been omitted.
(iii) In paragraph (2) the word “average” has been omitted and for the words “payable in respect of twelve calendar months” the words “paid in the month” have been substituted.
(iv) In the proviso after the word “pension” the words “and survivor’s pension payable to surviving spouse” have been inserted. For the words “one thousand and three hundred” the words “one thousand five hundred” have been substituted and the figure ”2006” has been changed to “2007”. This means the monthly pension of Rs. 1,300/= p.m. has been enhanced to Rs. 1,500/= p.m. from Ist July, 2007 which according to us is still low for an old retired employee or his old spouse to survive with such low pension in this era of fast growing inflation.
(v) After paragraph (2) of the Schedule a new paragraph (3) has been added as under:-
“(3) The monthly rate of old-age pension, invalidity pension and survivours pension being paid on or before first July 2007 under paragraph (1) above shall be increased by fifteen percent”
Our comment that it too being low is the same as given above.
V- Amendments in the Companies Profits (Workers Participation) Act 1968
1- In Section 2 (b) the Companies Act, 1913 has been substituted by the Companies Ordinance, 1984 and so also number of the Act and the Ordinance but there has been no mention of the number of the Act in Section 2 (b) and there is no marginal heading as mentioned in the amendment.
2- While making the above amendment Section 2 (d) has been left out to amend as it also contains the Companies Act, 1913 and it’s Section 87 – C which also required to be changed and mention of the corresponding Section of the Companies Ordinance, 1984.
3- In Section 2 (f) after the word “company” occurring for the second time, commas and the words, “including employed by or through the contractors” have been inserted and for the words “in the employment of” the words “working for or in” have been substituted.
NOTE: – This is very significant and controversial change to include the workers of all types of contractors. The employees employed by a Co. through a labour supply contractor supplying labour to employers as held by the Supreme Court are the employees of the Co. as after supply of labour and getting Commission by the Labour supply contractor like Recruiting Agents for the Middle East such employees are employed, taken work, supervised and paid wages by the Co. but employees employed by an independent contractor are totally different. The Labour Laws and any other law in Pakistan do not prohibit employer to give jobs on contract to be done by an independent contractor by employing his own workers, pay, supervise, control, remove, etc his workers and workers / employees of such independent contractor are not employees / workers of the Co. i.e. the principal employer. There are provisions of Contractor in no less eight labour laws in Pakistan. This un-thoughtful change would create confusion, controversies and litigations.
4- In Section 3 (1) (b) the words and others “which shall, where the accounts have been audited by an auditor appointed under Section 23 of the Industrial Relations Ordinance, 1969 (XX III of 1969), be assessed on the basis of such audit” have been correctly omitted being redundant after IRO, 2002 but inadvertently instead of Section 23-B, Section 23 has been mentioned in the amendment and also there being no equivalent of Section 23 – B of IRO, 1969 in IRO, 2002.
5- In the Schedule to the Act:
(i) In its paragraph 4 (a) three categories have been substituted by new three categories as under;
1. Workers drawing average monthly wages not exceeding seven thousand five hundred rupees.
2. Workers drawing average monthly wages exceeding seven thousand five hundred rupees but not exceeding fifteen thousand.
3. Workers drawing average monthly wages exceeding fifteen thousand rupees.
6- The wage limits of the three categories have been raised and more important that there is no upper limit of wage in the category No. 3 above and the workers getting average wages over Rs. 15,000/= p.m. shall also get their share.
7- In clause (d) “three” has been changed to “four”. By this the upper limit of payment to a worker from his share has been raised to four times the minimum wage i.e. now 4,600 4 = Rs 18,400 in a year which is a step towards improvement. We are of the view that the limit be removed or made four times the last total monthly wage of the worker.
8- We are of the firm view that the condition of being a worker under IRO, 02 mentioned in the definition of worker in Section 2 (f) be removed and all employees be made to share in the profits as all employees irrespective of their category contribute to the profits.
The above may be carefully read and understood. In case of any doubt, you may consult your consultant. This Circular is also available on our above website.
For M/s S. M. Yaqoob
