Labor Law Compliance in Pakistan

The labor laws compliance in Pakistan can broadly be categorized within the following acts & ordinances:

  • Industrial Relations Act (IRA), 2012
  • The law that provides for compulsory levies
  • The law that provides for minimum standards for employees
  • The law that sets standards for work place

The primary (federal) law that regulates the relationship between employer and employee is:

Industrial Relations Act (IRA), 2012

The law operates in the following areas:

  • Relating to formation of trade unions
  • Improvement of relations between employers and workmen in the Islamabad Capital Territory (“ICT”) and in trans-provincial establishments and industry

The Act extends to the whole of Pakistan and applies to all persons employed in any establishment or industry, in the ICT or carrying on business in more than one province, but does not apply to any person employed:

  • In the Police or any of the Defense Services of Pakistan
  • In the administration of the State other than those employed as workmen
  • As a member of the Security Staff of the Pakistan International Airlines Corporation or drawing wages in pay group not lower than Group V in the establishment of that Corporation
  • By the Pakistan Security Printing Corporation or the Security Papers Limited
  • By an establishment or institution for the treatment or care of sick, infirm, destitute or mentally unfit persons excluding those run on commercial basis.

Employer means any person or body of persons, whether incorporated or not, who or which employs workmen in the establishment under a contract of employment and includes “any person responsible for the management and control of the establishment.

Establishment means any office, firm, factory, society, undertaking, company, shop or enterprise which employs workmen directly or through a contractor for the purpose of carrying on any business or industry and includes all its departments and branches in the ICT or falling in more than one province.

Industrial Dispute means any dispute or difference between employers and employers or between employers and workmen or between workmen and workmen which is connected with the employment or non-employment or the terms of employment or the conditions of work of any person.

Industry includes any business, trade, calling, employment or occupation for production of goods or provisions of services in the ICT and falling in more than one province, and excluding those set up exclusively for charitable purposes.

Responsibilities of Employer Under IRA, 2012

  • Not to impose any condition in a contract of employment seeking to restrain the right of a person who is a party to such a contract to join a trade union or continue his membership of a trade union
  • Not to refuse to employ or refuse to continue to employ any person on the ground that such person is, or is not a member or officer of a trade union
  • Not to discriminate against any person in regard to any condition of employment or working on the ground that such person is, or is not a member or officer of a trade union
  • Not to dismiss, discharge, remove from employment or transfer or threaten to dismiss, discharge or remove from employment or transfer a workman or injure or threaten to injure him in respect of his employment by reason that the workman (i) is or proposes to become, or seeks to persuade any other person to become, a member or officer of a trade union; or (ii) participates in the promotion, formation or activities of a trade union
  • Not to induce any person to refrain from becoming, or to cease to be a member or officer of a trade union by conferring or offering to confer or procuring or offering to procure any advantage for such person or any other person
  • Not to compel or attempt to compel any officer of the collective bargaining agent to arrive at a settlement by using intimidation, coercion, pressure or threat.
  • Not to interfere with or in any way influence the balloting for the determination of the collective bargaining agent
  • Not to recruit any new workman during the period of a notice of a strike or currency of a strike which is not illegal except upon the satisfaction of a Conciliator
  • Not to close down the whole of the establishment in contravention of Standing Order 11-A of the WP Ord. VI of 1968
  • Not to commence, continue, instigate or incite others to take part in, or expend or supply money or otherwise act in furtherance or support of, an illegal lockout
  • Nothing in sub-section (1) of section 31 shall be deemed to preclude an employer from requiring that a person upon his appointment or promotion to a managerial position shall cease to be, and shall be disqualified from being, a member or officer of a trade union of workmen

Penalties under IRA 2012 for Employer

  • Breach of settlement (first offence imprisonment which may extend to 30 days or fine (Rs. 30,000) or both) and for each subsequent offence, with fine (may extend to Rs. 75,000)
  • Failure to implement settlement agreement, liable to imprisonment which may extend to 15 days or fine (Rs. 30,000) or both
  • For false statement, liable to imprisonment which may extend to 15 days or fine (Rs. 75,000) or both
  • For discharging officer of trade union in certain circumstances, liable to imprisonment which may extend to 15 days or fine (Rs. 30,000) or both
  • For embezzlement or misappropriation of funds, liable to imprisonment which may extend to 30 days or fine not to exceed the amount found by a Court to be embezzled
  • For obstructing inspector in exercise of any power under section 29, or failure to produce on demand by an inspector any register or other document et al., fine (may extend to Rs. 75,000)
  • For contravening section 27 or 28, imprisonment which may extend to 15 days or fine (may extend to Rs. 100,000) (section 74), and no Court to take cognizance unless complaint in writing by Registrar
  • For any other offences, if no penalty is provided, fine (may extend to Rs. 10,000)

Labor Laws Assigning Levies

The following are the labor laws assigning levies on the employers for the benefit of their employees or workers:

Employees’ Old Age Benefit Act, 1976 (EOBI)

EOBI applies to every industry or establishment wherein the employer employs five or more persons directly or indirectly. The law continues to apply to every such industry or establishment even if the number of persons employed is reduced to less than five.

The law provides benefit to employees in the following areas:

  • Old Age Pension
  • Old Age Grant
  • Survivor’s Pension
  • Invalidity Pension

Every employer is required to pay contribution at the rate of 5% per month of every person in his insurable employment. Contribution by the insured person is at the rate of 1% of the wages in the prescribed manner. Government of Pakistan may make such contribution to the institution as it may determine from time to time. Contributions; fall due, at the end of the month, to which they relate – shall be paid not later than the 15th of the following month.

Registration Requirement Under the EOBI

An employer to whom the Act becomes applicable is required to be registered with the institution within thirty (30) days from the day on which the Act becomes applicable to such employer as well as of every insured person employed. In addition, every insured person may also communicate his name and other prescribed particulars to the Institution.

Procedure of Registration for EOBI

  • The employer is required to communicate to the Institution the name and particulars of the industry or establishment in Form PR-01 and of every insured person employed therein in Form PE-01.
  • The institution on receipt of such communication shall register the name of the industry or establishment or the insured person in such manner, and issue to the industry or establishment a Certificate of Registration in Form PI-02 and to every insured person a Registration Card in Form PI-03.
  • The employer shall file with the Institution, information at the time of registration and thereafter in the month of July every year as set out in Form PR-02 for Self-Assessment Scheme and in Form PR-02A for normal scheme along with copy of paid challan as set out in Form PR-03.

In addition, every employer shall submit to the Institution a quarterly return in Form PR-02 containing full particulars of every person in his insurable employment accompanied by receipted copies of the Contribution Payment Slips in Form PR-03in respect of each month of the relevant quarter, within fifteen days of the end of the quarter to which it relates.

Provincial Employees’ Social Security Ordinance, 1965 (PESS)

This law extends to the whole of Pakistan and applies only to such areas, classes of person, industries or establishments from such date or dates and with regard to the provision of such benefits as Government may, by notification, specify in this behalf.

The purpose of the Ordinance is to provide benefit to certain employees or their dependents under the following circumstances:

  • In the event of sickness
  • Maternity benefits
  • Employment injury or death
  • For matters ancillary thereto

The employer shall in respect of every employee, whether employed by him directly or through any other person pay to the Institution a contribution at such times, at such rate [not more than 6%].

Procedure for Registration for PESS

  • Within ten (10) days of the Notification, the employer of an establishment is required to complete an application for registration at the nearest local office of the institution on the prescribed FormR-1 indicating there in the approximate number of his employees liable to become secured persons.
  • Within fifteen (15) days of the acceptance of application for registration, the employer files with the Institution, a Secured Person’s Registration Form (Form R-2), in respect of each employee liable to become a secured person along with a summary (Form R-3).
  • On receipt of the Secured Person’s Registration Form, the Institution issues the Secured Person’s Registration Card (Form R-5) to the employer who shall distribute them to each of the employees named there on, ensuring that the signature or thumbprint of the secured person is clearly impressed on the appropriate space on page 01 of the Card.

Workers Welfare Fund Ordinance, 1971 (WWFO)

WWFO is applicable to all industrial establishments whose total income is more than Rs. 1,000,000/-annually to provide for:

  • Residential accommodation and other facilities for workers
  • Matters connected therewith or incidental thereto
  • Establishment of housing estates or construction of houses for workers
  • Other welfare measures, including education, training, re-skilling and apprenticeship for the welfare of the workers.

The rate of contribution under WWFO is two (2) percent annually of the total income of the establishment as is assessed under the Income Tax Ordinance, 2001. The establishment shall deposit the amount with the income tax officer having jurisdiction over the establishment, while submitting a return of total income.

West Pakistan Maternity Benefits Ordinance, 1958

The law is applicable to women workers employed in an establishment i.e. an organization whether industrial, commercial or otherwise. This law requires an establishment to grant maternity benefits to women workers.

Every employer is liable for payment of maternity benefits to a female worker at the rate of her wages last paid during the period of six weeks immediately preceding and including the day on which she delivers a child and for each day of six weeks succeeding the day, provided she has been employed at the establishment for a period of not less than four months immediately preceding the day on which she delivers the child. Furthermore, the employer shall pay maternity benefit for twelve weeks to a woman entitled thereto.

Workers Children (Education) Ordinance, 1972

This law is applicable to establishments employing ten or more workers. The definition of “worker” for applicability of this law is limited to a worker whose monthly wages do not exceed Rs. 15,000/-.

The purpose of the Ordinance is to raise funds for the education of the children of the workers. The fund is required to provide educational facilities to the workers’children and assist with the improvement of schools located in or attached to the industrial undertakings.

Companies Profit (Worker’s Participation) Act, 1968

This Act applies to all companies engaged in industrial undertaking, if they fall within any of the following categories:

  • 50 or more workers employed at any time during a year
  • Paid up capital of not less than Rs. 5 million
  • Value of fixed assets of the company Rs. 10 million or more

The purpose of the law is to provide for participation of workers in the profits of companies. Every company to which this Act applies is required to establish a fund and pay five percent of its profits during a year to the fund. Audited accounts have to be furnished to the Federal Government and the Board created under the Act, not later than nine months of the closing year.

If a company utilizes the amount of Fund for its business operations upon approval by the Board, it shall pay to Fund for its business operations, interest at the rate of 2.5% above the bank rate or 75% of the rate at which dividend is declared on its ordinary shares, whichever is higher.

Workman’s Compensation Act, 1923

The law is applicable to persons employed as workmen (other than a person whose employment is of a casual nature and who is employed otherwise than for the purpose of the employer’s trade or business). This Act provides for the payment by certain classes of employers to their workmen of
compensation for injury by accident, disease or death arising out of and in the course of his employment.

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