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December 12, 2015

Devolving labour


December 12, 2015

By virtue of the 18th Amendment, labour laws were omitted from the concurrent legislation list in the constitution and devolved to the provinces. It was also provided that the process of devolution of the matters mentioned in the said list should be completed by June 30, 2011.

The Punjab government was most active in this regard and took the lead in devolving a number of labour laws before the stipulated date; Khyber Pakhtunkhwa followed. The governments of Balochistan and Sindh remained dormant till they provincialised the Industrial Relations Act in 2010 and 2013 respectively.

In most cases the legislatures only prefixed the names of their respective provinces before the title of the laws and changed the word ‘federal’ to ‘provincial’ wherever it appeared in the text without making any other changes in the law.

The management and administrative control of two of the legislations generating huge funds collected from employers – the Employees’ Old-Age Benefits Act, 1976 (EOBA) and the Workers Welfare Fund Ordinance, 1971 – have so far remained with the federal government. These two legislations are the focal points of complications caused for the federal government as well as employers on account of devolution.

The complexities have further escalated due to the promulgation of the Sindh Employees’ Old-Age Benefits Act, 2014 and the Sindh Workers Welfare Fund, Act 2014, to the exclusion of the other three provinces. The Sindh government is now pressing upon the federal government to release their share of the funds under the two laws.

EOBA is one of the most useful labour welfare legislation promulgated in the post-independence era. The preamble of the law states that its purpose is to repeal and re-enact the law relating to old-age benefits for persons employed in industrial, commercial and other organisations. It is currently applicable to every organisation employing five or more persons by an employer either directly or through any other person.

The Employees’ Old-Age Benefits Institution (EOBI) has been managing this scheme smoothly. After the constitutional amendment, the centrally-run EOBI has continued to collect the funds from employers and disbursing pensions to the retired employees all over Pakistan. At present the majority of pensioners are drawing a monthly pension of Rs5,250. They can be divided into: old-age: 352,379; survivors: 164,230; and invalids: 9,233.

The Pakistan Workers Federation and few other labour federations hold the view that the management and control of the EOBI should continue with the federal government. They believe that its devolution to the provinces will have adverse consequences for pensioners in KP and Balochistan, where the total amount of monthly EOBI pensions disbursed is more than the funds collection from the employers.

Also which province would be responsible to disburse the pensions of people going back to live in their homes in KP, after working in other provinces their whole lives? The KP government has, therefore, in accordance with clause 147 of the constitution, requested the federal government to continue managing the EOBI on its behalf.

According to labour leaders, Pakistan is a signatory to bilateral agreements on social protection with Denmark, Holland and Libya and is also bound by the provisions of the UN’s Universal Declaration of Human Rights. So how can the government of Pakistan fulfil its obligations towards the people to provide to them economic and social protection in pursuance of the international commitments if the EOBA is devolved to the provinces?

Through an amendment in 2005, the definition of wages under the EOBA was changed to “wages means the rates of wages as declared under the Minimum Wages for Unskilled Workers Ordinance, 1969”. It implied that the monthly contributions would be paid to the EOBI on the prescribed percentages of the applicable rate of minimum wages under this Ordinance. This was Rs3,000 in 2005 and after gradual increases every year increased to Rs6,000 in 2008.

After the 18th Amendment, the minimum wage was increased to Rs7,000 per month in 2010 and to Rs8,000/9,000 per month in 2012 by the respective provinces under the Minimum Wages Ordinance, 1961 and not under the Minimum Wages for Unskilled Workers Ordinance, 1969. However, the definition of wages under the EOBA was not amended. Although employers were not obliged to pay the contribution at the enhanced rate of wages, they complied with the directives issued to this effect by the EOBI.

Thereafter the minimum wages have been increased to Rs10,000 in 2013, Rs12,000 in 2014 and to Rs13,000 in 2015, but still a majority of the employers continue to pay the contribution on Rs8,000. Out of the five large companies and two hospitals surveyed, two companies and the hospitals are paying contributions on Rs8,000 and three companies at the applicable rate of minimum wage, which is now Rs13,000 per month.

The monthly contributions are calculated at six percent of these amounts – Rs8,000 or Rs13,000 as opted to by the respective employers, five percent as employers and one percent as employees share. The EOBI is completely silent on the issue since 2012, but is still calculating the monthly pension at the salary of Rs8,000.

In view of the foregoing facts, the issue of whether or not the EOBA is to be devolved to the provinces needs to be resolved by the federal government quickly – but without jeopardising the interests of the stakeholders.

The writer is an industrial relations professional.



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