ON Feb 26, 2011, the Sindh High Court held five amendments to the labour laws brought about by the then government through the Finance Act, 2007 to be ultra vires. This judgement was in connection with a constitutional petition filed by the Employers’ Federation of Pakistan and 14 companies.

The amendments pertained to the Work­men’s Compensation Act, 1923; the West Pakistan Industrial and Commercial Employ­ment (Standing Orders) Ordinance, 1968; Companies Profits (Workers Participation) Act, 1968; Minimum Wages for Unskilled Workers Ordinance, 1969 and Employees’ Old-Age Benefits Act, 1976.

According to the verdict, these amendments had no link with the items specified in Article 73 (2) of the Constitution, which only dealt with money matters. Since they did not fall within the scope of the money bill, the five laws could only have been amended by parliament. The following were some of the key amendments brought about through the Finance Act, 2007, which were treated as without legal authority;

Benefits of workers were curtailed by a court ruling.

Compensation Act: The wage ceiling of Rs3,000 was removed whereby the act became applicable to persons employed in any capacity specified in the act.

Standing Orders: Besides entitlement to gratuity or provident fund, the amendment had introduced a third option of setting up a government-approved pension fund but only through the process of collective bargaining, in which case no gratuity would be payable for the period during which a contribution had been made to the fund.

Companies’ Profits: The definition of ‘worker’ was amended to include workers employed by or through contractors. The amounts prescribed in three slabs as benefit for the workers were increased. The upper wage limit was removed so that those drawing more than Rs15,000 per month were also eligible to receive benefits. The maximum allocation of a worker’s share in the fund was increased from three to four times the prevailing minimum wage — according to the existing minimum wage of Rs13,000, this comes to Rs52,000 a year.

Minimum Wages: Wages for unskilled workers were increased from Rs4,000 to Rs4,600 per month.

Old-Age Benefits: The minimum EOBI pension was increased from Rs1,300 to Rs1,500 per month starting July 2007. Owing to an increase in minimum wages, the respective shares of employers and employees in the monthly EOBI contribution were increased.

EOBI had already increased the monthly pension from Rs1,300 to Rs1,500 per month from July 2007 and the court judgement was given in February 2011. It was therefore not possible for EOBI to make recoveries of the excess pension amount already paid. Neither did the institution reduce the amount of pension after the court decision. Similarly, the employers did not reduce the amount of minimum wages from Rs4,600 to Rs 4,000, as it would have caused hardship to the affected workers possibly leading to labour unrest.

On account of this judgement, the monetary benefits given by companies under the Companies Profits Act to their contractors’ employees were discontinued and benefits for their own employees with meagre incomes were reduced.

It is unfortunate that since then the paltry amount of their share in the company’s profit has been going to the federal government which already collects huge amounts from the employers on this count. Utilisation of the funds collected by the government on workers’ welfare schemes has always been inadequate. For instance, most workers’ housing established with these funds remains without electricity, water and sewerage. Due to the poor quality of construction, the houses soon start crumbling and become unsafe.

This situation has created another dilemma which remains controversial to date. A board of trustees has to be constituted under the Companies Profit Act to determine the amount of company profit to be disbursed amongst eligible workers. This board has to operate within the framework provided by the law. The board comprises four trustees, two elected by the workers of the company from amongst themselves and two nominated by the management.

Since the high court judgement, workers trustees have been pressurising the management trustees not to discontinue disbursement with regard to contractual workers and not to reduce with respect to their own employees. Their argument is that the already small fraction of workers’ share in their company’s profits will reduce further and the bulk will be transferred to the government.

Aggrieved by the ramifications of Sindh High Court judgement, some labour unions had filed review petitions against it before the court, but these have fizzled out.

The Sindh government is currently involved in the process of devolving the laws relating to payment of wages, factories, terms of employment, workers’ compensation, workers’ profits, the minimum wages and bonded labour. It is hoped that the benefits reduced by virtue of the court judgement will be restored through the laws pertaining to these issues.

The writer is an industrial relations professional.

Published in Dawn, December 31st, 2015