Share in profits

March 16, 2018


FULFILLING his election manifesto, Zulfikar Ali Bhutto, who headed the first PPP government, enacted four acts and ordinances for the welfare of workers. These were the Workers Welfare Fund Ordinance, 1971; Workers Children (Education) Ordinance, 1972; Employees Cost of Living (Relief) Act, 1973 and the Employees’ Old-Age Benefits Act, 1976. Two other prominent labour welfare enactments ie Provincial Employees Social Security Ordinance, 1965 and Companies Profits (Workers Participation) Act, 1968, were already in existence.

These welfare laws were enforced smoothly till the passage of the 18th Amendment in 2010, whereby the subject of labour was transferred to the provinces. Now all are in dire straits. Although the said amendment was brought in by the PPP government, it was the PML-N government in Punjab which adopted a number of key labour laws, without making any material change in the content. The other provinces remained inactive on this count for quite some time.

Soon, a bench of the Sindh High Court, in a landmark judgement in 2011, rendered five amendments in the labour laws brought about through the Finance Act 2007, ultra vires, stating that there was no connection between them and Article 73 (2) of the Constitution, dealing with money matters. Because they did not fall within the purview of the money bill, only parliament could amend the laws. In 2016, the judgement was upheld by the Supreme Court.

Many employers are not contributing to the EOBI.

The result was that the benefits reverted to those of 2006, which affected improvements. However, the employers did not decrease the minimum wages, increased from Rs4,000 to Rs4,600. Nor did EOBI decrease the monthly pension, which was, in fact, increased from Rs1,300 to Rs1,500 a month from July, 2007.

From 2013 to 2016, Sindh passed 13 acts, which includes the Sindh Employees’ Old-Age Benefits Act, 2014 (EOBI) and the Sindh Companies Profits (Workers’ Participation) Act, 2015. Both laws had a strong federal base and should not have been devolved. Their passage has not only created difficulty in implementation for the employers and deprived the workers of an increase in benefits, it also continues to cause revenue loss to the government.

EOBI is still being managed by the centre, and the Sindh government has not constituted an institution to run this scheme. After the 18th Amendment, employers all over Pakistan are paying monthly contributions to EOBI at rates ranging from six per cent of Rs6,000 to 6pc of the current minimum wages ie Rs15,000. Because of the 2014 law, many employers are not contributing at all to EOBI out of fear that the provincial government may claim arrears from them once the institution is formed. EOBI is helpless — and is not increasing the monthly pension.

Sindh is the only province which has devolved the Companies Profits (Workers’ Participation) Act, vide the act of 2015 which has been made applicable to companies with registered offices in the province and with offices, departments and branches in Islamabad Capital Territory or in more than one province and that have a common balance sheet. It has, therefore, been made applicable to the trans-provincial companies.

The law has been made applicable with retrospective effect from July 2011 and has restored all those increases in the share of profits, which were declared ultra vires vide the Sindh judgement of 2011. Improvements in the scope and benefits restored through the law include removal of the wage ceiling of Rs10,000, making it applicable to more employees. Besides, the employee’s share has been increased from three to four times of the minimum wage, which comes to Rs60,000; benefits apply to contractors’ employees; and three wage categories prescribed for share distribution have been enhanced.

Workers of trans-provincial companies operating in Sindh, will get the benefits but their counterparts in other provinces will get nothing despite a Sindh High Court judgement last month which provides for the proportionate allocation and distribution of profits based on the number of workers in each province. Since provinces other than Sindh are still governed by the 1968 law, where the wage ceiling for eligibility is still Rs10,000 while the existing minimum wage is Rs15,000, none will get their share although the company may be making huge profits.

A combined result of the Sindh High Court judgement of 2011 and the 2015 law is that, fearful of future claims by governments, the majority of employers are not making any payment to the government’s welfare fund, neither to the FBR nor the Sindh Revenue Board for the last seven years. Better cooperation and understanding between the federal and provincial governments would have saved stakeholders from this situation.

The writer is an industrial relations professional.

Published in Dawn, March 16th, 2018