June 23, 2008	Monday	Jamadi-us-Sani 18, 1429

As announced in the budget 2008--09, the government is carrying out amendments in labour welfare laws and the Minimum Wages for Unskilled Workers Ordinance, 1969 to be enforced from July 1, 2008.

In the Provincial Employees’ Social Security Ordinance, 1965 the wage ceiling for applicability will be increased from Rs5,000 to Rs10,000 per month. At the same time, the percentage for paying the monthly contribution on behalf of each employee named under the Ordinance as “Secured Person” will be reduced from seven to six per cent.

The Social Security Scheme Ordinance was introduced for providing benefits to employees or their dependents in the event of sickness, maternity, employment injury or death. But the Social Security Institution created by virtue of this ordinance failed to provide the standard medical services in hospitals and dispensaries. As a result, owners as well as employees of such organisations preferred to have their own company managed medical schemes.

The 100 per cent increase in wage ceiling allowed by the government for coverage under the Social Security Scheme is highest ever. Although the rate of monthly contribution payable by employers has been reduced from seven to six per cent, the maximum amount of contribution will increase from Rs350 to Rs600, i.e. Rs250 per employee drawing a monthly salary of Rs10,000.. The Social Security Institution has got vast powers under the ordinance to extend scope of the scheme to any type of organisation (through gazette notification), whether or not run on profit.

Since there will be a big increase in the funds so generated by the Institution, it is high time that it diverts its energy and resources to provide medical services of better quality.

The West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance 1968 is being amended whereby under Standing Order 15, the amount of subsistence allowance will be increased from the existing 50 per cent of wages to full wages. This allowance is payable to an employee who has been accused of misconduct and suspended from service pending enquiry into the charges levelled against him.

Under the existing law, the 50 per cent subsistence allowance is converted to full wages if the employee is not found guilty of misconduct. It was a good deterrent for the employee for not committing a misconduct which will now be lost through this amendment. Otherwise, the implication of this change to employers is insignificant.

Through an amendment in the Workers Welfare Fund Ordinance, 1971, the government will extend the law to commercial and other services sectors. At present, it applies only to industrial establishments. Under the ordinance, establishments whose total income during the year is not less than Rs0.5 million, pay two per cent of their income to the fund. The fund is utilised for providing residential accommodation and other facilities such as marriage grants, sewing machines and bicycles etc to workers. Hence the scope of the ordinance as well as fund generation will be increased substantially.

Through an amendment in the Employees’ Old Age Benefits Act, 1976 in 2006, the law was made applicable to industrial and commercial establishments set up after July 1, 2006 and employing 20 or more employees. This number was increased from ten which will now be reduced to five or more employees. Besides the industrial and commercial establishments, the Act will now also apply to banks and the banking companies.

The rate of monthly contribution payable by the employer under the EOB Act is being reduced from six to five per cent. Nevertheless, the amount at which this contribution is payable is linked with the minimum wages which has been increased from Rs4,600 to Rs6,000 per month.

Previously, the amount of contribution payable on behalf of each employee was Rs276 which will now be Rs300 per month. The additional one per cent contribution payable by each covered employee will also be increased from Rs46 to Rs60 per month. Hence the employer will now pay to the EOB Institution Rs360 per month per employee against the previous Rs322. The amount of monthly pension is being increased from Rs1,500 to Rs2,000 which is a good gesture from the government.

Since the EOB contributions are payable on behalf of all employees-- both management and non-management--, there has been a big increase in the employers manpower cost on this account. It has now become a tradition with the government to increase the minimum wage every year, payment of contributions under this Act should be linked with a fixed amount as was the position prior to the amendment of 2005 so that the employers are at least not burdened with this additional liability every year.

Minimum wage of workers is being increased every year since 2005 when it was Rs3,000 per month. This year it is being increased by more than 30 per cent from Rs4,600 to Rs6,000 per month. The recent practice of bringing about major amendments in labour laws through the Finance Bills should be discontinued. And the government should take all the stake holders into confidence before carrying out such amendments in the substantive laws.

The writer is the Employees Relations Specialist with the Aga Khan University