FederalLabour LawsAmendments made in Five Labour Laws Through the Finance Bill, 2008

December 6, 20080

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Date: 12-06-2008

Circular Number: C-113

Amendments made in Five Labour Laws Through the Finance Bill, 2008

The amendments have been made in five labour laws through the Finance Bill, 2008 which after passing by the Parliament as an Act and assent of the President shall become law applicable from the 1st July 2008.Our comments and views given below are based on amendments as proposed in the Bill and if the Parliament while passing the Bill as an Act makes any modifications our comments shall stand modified accordingly.

1. Increase to the Government Employees:

20% increase in Basic Pay, increases and revision in several allowances/benefits to the Federal Government employees announced in the budget speech are meant only for the Federal Government employees and the same are not part of any labour law, not applicable to the workers and the same be treated accordingly.

2. Amendments in the Provincial Employees Social Securities Ordinance,1965:

(i). In Sub-Section 2( 8 )( f ) the word “five” occurring twice have been substituted by the word “ten” which means that the employees now getting over Rs.10,000/=p.m. shall not be covered by the Ordinance or any new employee starting on wages above Rupees Ten Thousand per month shall not a covered employee under the Ordinance but any employee covered by the Ordinance if his wages subsequently exceed Rs.10,000 /= p.m. he would not go out and still remain covered by the Ordinance but contribution shall be paid on his wage of Rs.10,000/=p.m only.
(ii). In sub-Section 2(25a) pertaining to the self assessment scheme the fixed rate of Rs.210/=p.m. contribution has been raised to Rs.360/= p.m. and once again the self-assessment scheme has not been made attractive.
(iii). In section 20(1) after the word “rate” the words “not more than six percent” have been inserted making the matter clear the rate of employer’s contribution as 6% of the wage. In the provision under it the word “two” has been substituted by “four” and the word “four” by “ten” and thereby 6% contribution limited to Rs.5000/= p.m. wages has been doubled to on Rs.10,000/= p.m. wages and no contribution shall be payable on the wage in excess of Rs.400/= per day or Rs.10,000/= p.m The burden of contribution has been doubled on the employers which is not justified keeping in view as the scheme is being run by the Institutions.
(iv). In Section 20-A in the self-assessment scheme Rs.210/= p.m. fixed contribution has been raised to Rs.360/=p.m. as explained above.

3- Amendments in W.P. industrial & Commercial Employment (Standing Orders) Ordinance,1968:

1) The words “West-Pakistan” having become misnomer have been correctly removed. The same should be done in the case of the W.P. Shops & Establishment Ordinance, 1969.
2) In the standing order 15(5) of the Ordinance the words “subsistence allowance of not less than fifty percentum of wages. If the workman is found not guilty he shall be deemed to have been on duty during the period of suspension and shall be entitled” have been omitted but the words thereafter still remain which means that during the period of suspension the worker shall be entitled to the same full wages as he would have received if he had not been suspended irrespective of the fact whether the worker is found guilty or not during the inquiry.

4- Amendments in the Employees Old-Age Benefits Act,1976:

I. Section 9-A was inserted in 1986 by the Government of the Prime Minister Late Muhammad Khan Junejo and the Federal Government started contributing equal amount collected by the Institution. This was substituted in 1995 and no such contribution is paid by the Federal Government. The Government should also take some responsibility along with the employers instead of empty tall talks alone for welfare of the workers.
II. In Sub-clause (i) of section 1(4) the word “ten” appearing twice has been substituted by the word “five” and the provision under it has been omitted. This is a far reaching change in the Act made applicable where 5 or more employees are employed and it may be shops which do not maintain records even under the Income Tax law, it is not compulsory for them to maintain account books and may file income tax returns under the self assessment. This amendment is going to be grossly abused by the officials of the Institutions as such small establishments cannot meet their demand of producing records and account books and such small establishments cannot afford to meet the requirements of the Act. beside adding burden on them.
III. In its subsequent Sub-clause (ia) the same as above change has been made.
IV. In Section 9(1) the word “six” has been substituted by the word “five” thereby 6% contribution has been reduced to the previous rate of 5% contribution, perhaps due to chaining large number of small establishments having 5 or more employees resulting in higher amount of total contribution collected by the Institution.
V. In section 22(2) Sub-clause (ii) a provision under it has been added as under:
“Provided that nothing in the section shall apply to an employee insured
under the provisions of this Act on or after 1st day of July, 2008”.
This reduces the benefit to the employees.
VI. Section 47(e) has been omitted to cover banks under the Act.
VII. In the Schedule, the paragraph (2) has been substituted as under:
“(2) The monthly wages of an insured person, referred to in paragraph (1) shall be
calculated on the basis of wages on which contributions were paid in respect of
Twelve calendar months immediately proceeding the date on which insured
Person fulfils the conditions for entitlement to any benefits under this Act:
Provided that the old-age or invalidity pension payable to an insured person
and survivor’s pension payable to the survivors of the deceased insured person shall not be less than two thousand rupees per month for pension
commencing on or after 1st day of July, 2008”. The pension starting on or after 1-7-2008 has been raised to Rs.2,000/=p.m.
VIII. In paragraph (3) the pension being paid on or before 1-7-2008 has been increased
by 15% as before but not 20% as done by the Federal Government for its

5- Amendments in the Workers Welfare Fund Ordinance, 1971:

I. After Section 2(f)(iv) a new sub-clause (iv-a) has been added as under:
“(iv-a) any establishment to which the West Pakistan Shops & Establishment Ordinance for the time being applies”. The application of the Ordinance has been further extended.
II. In Section 4 (1) the words “of so much” and “as is assessable under the
Ordinance” have been omitted to collect more fund.
III. In Section 4(4) the words “At the time of making an assessment under the
Ordinance or as soon thereafter as may be the” and “on the basis of the
income so assessed” has been omitted for the same purpose as above.
IV- In Section 4(5) the word “assessed” has been substituted by the word “total”
and the words “Subsequent to the assessment made under the Ordinance”
have been omitted.
V- In section 11-B (3) after the word “sanction” at the end the words “with
Previous approval of the Governing Body” has been added.

6- The Minimum Wage of Rs.6,000/= p.m. under the Minimum Wages for
Unskilled Worker Ordinance, 1969

I- By amending the Column 2 of the Schedule to the Ordinance the rate of the
Minimum wages of Rs.4,600/=p.m. for unskilled workers has been raised to
Rs.6,000/=p.m. w.e.f 1-7-2008.
II- The Ordinance and the amendment apply to all industrial and Commercial
establishments irrespective of the number of workers employed. Now Rs.6,000
p.m. is the National Minimum Wage for the lowest category workers in Pakistan.
III- The deductions from the minimum wages for providing housing
accommodation and transport by employers have once again not been
IV- 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.6,000/=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.6,000 /=p.m.
V- 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.6,000/= p.m., the same shall continue and cannot be reduced. This minimum wage is now the starting minimum wage 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 this minimum wage. Apprentices are not included as unskilled workers who are governed by the Apprenticeship Ordinance, 1962.
VI- 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 6,000by 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.6,000/- p.m. wages.
The above may be carefully read and understood. In case of any doubt, our clients may consult us. This circular is also available on our above website.




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