Under the Companies’ Profits (Workers’ Participation) Act of 1968, businesses and industrial undertakings that employ more than 50 workers, or meet certain criteria of total assets and paid-up capital, are bound to distribute 5pc of their profit before tax each year to their labourers who toil to enrich their enterprises.

A complicated system of calculation and distribution of funds has been designed by first converting profit payable to workers into ‘units’ and then allocating those ‘units’ to each worker on the basis of wages drawn.

Profit sharing with employees looks like an exciting initiative to improve the quality of life of industrial workers, but behind all this, the real beneficiary is the government.

President Lasbela Chamber of Commerce and Industry (LCCI), Ismail Suttar explains “The formula laid down in the Act only covers workers drawing minimum wage. The maximum amount that can be given to an individual worker is also limited. As a result, only around 25pc of the fund is distributed among eligible workers and around 75pc goes to the government”.

Three out of four rupees distributable to the workers under the Companies Profits (Workers’ Participation) Act (WPPF) goes into government coffers. Why has no one ever bothered to ask why? It could be due to the perception that 5pc of the pre-tax profit would not make a sum worth fretting about. That however is not the case.

Profit sharing with employees looks like an exciting initiative to improve the quality of life of industrial workers, but behind all this, the real beneficiary is the government

Here are the figures collected by this writer from randomly selected, latest, full year audited accounts of just five corporations listed on the PSX.

Oil and Gas Development Company earned pre-tax profit of Rs 4.2bn and allocated 5pc of that amount, equal to Rs81m, for WPPF; Pakistan Tobacco Co on pre-tax profit of Rs10.6bn, set aside 568m for the WPPF; Nestle Pakistan’s workers’ profit participation worked out at Rs673m on profit before tax of Rs12.5bn; Fauji Fertiliser WPPF amounted to Rs1.32bn on its before tax earnings of Rs24.5bn and Indus Motors, which clocked pre-tax profit of Rs14.1bn in FY15, allocated Rs759m for WPPF. The aggregate amount of WPPF by the five firms works out to a staggering Rs4.1bn.

According to estimates by Ismail Suttar, workers would be doled out a mere Rs1bn (25pc) and the companies would be pressed to pay Rs3bn (75pc) to the government through the Ministry of Labour.

There are 558 listed companies - most earning varying sums in profit - and then there are more than 70,000 firms registered with the Securities and Exchange Commission of Pakistan. If just five corporations pay Rs3bn to the government as its unearned share in Workers’ Fund, how much would be eked out from all the registered firms?

Shabbar Zaidi, senior partner A F Ferguson and Co, chartered accountants, widely recognized as a tax guru, concurred that the amount collected by the government under the WPPF is colossal. He said that the amount is lumped under the head ‘Workers Welfare Fund’ in the Economic Survey of Pakistan.

“A break-up of the amount is not disclosed so it is difficult to say how much of that constitutes of the WPPF”, the previous minister of finance in the Sindh caretaker government, candidly admits: “no one knows where the amount goes or how it is spent”.

All through the years, workers have silently taken whatever was offered to them by their employers, partly due to a lack of understanding and partly due to the absence, or ineffectiveness, of combined bargaining agencies (CBA).

Habibuddin Junaidi, convener of the Sindh Labour Solidarity Committee, an alliance of trade unions, when asked why the unions never stood up against the unjust allocation of WPPF had no convincing answer. Many people have reasons to suspect mass corruption in the employment of WPPF that goes to the government year after year.

Although the Companies Profits (Workers’ Participation) Act directs the constitution of the Board of trustees with two members from management and two from the workers union, the two sides are often up in arms on the calculation and allocation of the tiny amount that form the workers’ piece of the pie. Many firms still deny a share in the WPPF to contractual workers.

“We totally disagree with the system”, says Majyd Aziz, former President, Karachi Chamber of Commerce and Industry. He was furious over the government pinching more than three quarters of the allocated sum in WPPF. He said that the ministry of labour, if it at all uses the funds, applies the amount to other districts, town and tehsils, away from the place the firms that provide the amount, are located.

“The entire amount should justifiably be retained by the companies for the welfare of their own workers and their families, and to meet their requirements of health, education, housing and assistance in case of contingencies”, he argues.

Published in Dawn, Business & Finance weekly, October 31st, 2016