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Last update: July 2008

Pakistan

Employment Law

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Employment Regulations

Employment Laws and Regulations has always been a key issue for the Government of Pakistan in helping to improve the protection of workers’ rights, the settling of industrial disputes and the compensation of workers grievances.

As the country continues to improve its economic outlook over the coming years, the growing importance of improving the social economic conditions of the workforce, and their families becomes increasingly important.

The labour policy is a "concurrent subject", under the Pakistani Constitution This means that both Federal and Provincial Government are responsible in implementing a synchronised policy on labour laws. Provinces may specify their own regulation according with the conditions set by the Federal Government. Other regulations are accepted only for specific needs of the Province at issue.

The total labour force of Pakistan is comprised at approximately 55.77 million people. Of this workforce, 43% work within the agriculture sector, 20.% in the manufacturing & mining sector and the remaining 37 % in the service sector.

Child Labour

The Employment of Children Act 1991 has been enacted to address the issues of child labour more effectively, in addition to the number of administrative and other initiatives being implemented to stop children working under the age of fourteen.


"No child below the age of fourteen shall be engaged in any factory or mine or in any other hazardous employment. All forms of forced labour and human trafficking are prohibited."


 

Work Permits

To enter Pakistan, for any kind of reason, you need to provide the following documents in order to obtain a visa:

  • Dully filled Visa form
  • Original Passport (valid for at least six months) along with its photocopy
  • Two recent passport size photographs (with white background)
  • Any other document(s) that can be helpful in obtaining a visa. Proof of residence in the UK (UK driving license/utility bill)

For any kind of visa requirement, you will need to bring the following forms of information before any Visa can be issued.

Concerning the business visa, the Pakistan's Government has worked up a Friendly List (BVL) of 66 Countries, including United Kingdom. Pakistan Missions abroad are authorised to grant five years validity (multiply entry visa) within 24 hours to businessmen of 66 countries. The duration of each stay would be restricted to three months.

You will be required to produce the following items:

  • Recommendation letter from your Chamber of Commerce & Industry of the respective country of the foreigner
  • Invitation letter from Business organization duly recommended by the concerned Trade Organization/ Association in Pakistan
  • Recommendatory letter by Honorary Investment Counsellor of Board Of Investment (Pakistan) / Commercial Attach posted Pakistan High Commissions/embassies/ consulates generals

For more information regarding your eligibility for this initiative, please click here for more information.


 

http://investinpakistan.pk/visa-sec.htm



Other useful contact details are listed below:


Consulate General of India
High Commission of India
G-5, Diplomatic Enclave,
Islamabad, Pakistan
Tel:+92-51-814371 to 75
Fax:+92-51-820742

High Commission of Bangladesh
House No. 1, Street No. 5
F-6/3, Islamabad
Pakistan
City: Islamabad
Phone: (+92) 51 2279 267
Fax: (+92) 51 2279 266
Email: bdhcisb@sat.net.pk
Office Hours: 0830 to 1600 hrs.

Embassy of Democratic Republic of Sri Lanka
House 2C, Street 55,
F 6-3, Islamabad
Phone: (+92) 2828723, (+92) 2278175, (+92) 2278175
Fax: (+92) 512828751
Email: srilanka@dsl.net 

 

The Employment Market

The population of Pakistan is currently at 177 million in 2011. This makes Pakistan the sixth most populous nation in the world with a total labour force of 54 million.

There is growing international pressure on Pakistan to improve its labour standards, especially for child labour. The government also faces the task of retraining an estimated 250,000 workers from the public sector who are considered surplus. There is no legal retirement age in the private sector; workers may retire according to company policy, which ranges by age from 55 to 60 years and by years of service from 15 to 24.

Un-skilled, semi-skilled and skilled labour is available and there are a number of employment agencies in Pakistan. However, for skilled managerial staff, it is best to advertise in the local press and conduct your own interviews.


 

Engagement and Dismissal

The services of a permanent worker cannot be terminated for any reason other than misconduct unless one month’s notice or wages have been given by the employer or by the worker, as they choose to leave their employers service. One month’s wages are calculated on the basis of the average wage earned during the last three months of service. Other categories of workers are not entitled to notice or pay in lieu of notice.


All terminations of service in any form must be documented in writing stating the reasons for such an act. If a worker is aggrieved by an order of termination he or she may proceed under Section 46 of the Industrial Relations Ordinance 2002, aimed at regulating the labour-management relations in the country, and bring his or her grievance to the attention of his or her employer, in writing, either him or herself, through the shop steward or through his or her trade union within three months of the occurrence of the cause of action. Forms of termination have been described as removed, retrenched, discharged or dismissed from service.


To safeguard against any colourful exercise of power, victimization or unfair labour practices, the Labour Courts have been given powers to examine and intervene to find out whether there has been a violation of the principles of natural justice and whether any action by the employer was unjust.


 

Source: International Labour Organization.

 

Employees' Rights and Remuneration

In September 2002 the government adopted a new labour policy that aims eventually to consolidate more than 50 existing labour laws into just seven. Of these, a new Industrial Relations Ordinance 2002 (IRO 2002) was passed in October 2002 to replace the IRO 1969. The other six new laws being drafted are the Wages Ordinance, the Condition of Employment Ordinance, the Human Resource Development Ordinance, the Occupational Safety and Health Ordinance, the Labour Welfare and Social Safety Ordinance, and the Reformation of Labour Judiciary Ordinance; these are expected to be presented for parliamentary approval by the end of 2004. The government also aims to reform the labour judiciary, improve working conditions and strengthen democratic trade unionism. However, the trade unions have strongly criticised both the policy and the IRO 2002.

The unions oppose the IRO 2002 on various grounds. They point out that it has curtailed the power of courts to order the compulsory reinstatement of workers after wrongful termination, allowing them instead to order only compensation. Furthermore, courts may no longer send employers to prison; they may order fines of up to only PRs50,000. Unions claim that their registration process has been made more difficult. They also argue that a designated collective-bargaining agent could previously have ordered a re-audit of the company's accounts and that unions could have presented a panel of auditors from which the government would choose one; this is no longer possible under the IRO 2002. The IRO 2002 has also curtailed the power of the National Industrial Relations Commission, and proposes to abolish the labour appellate tribunal. Several joint negotiating forums have been eliminated and replaced with a workers' council that promises little. The government claims that these moves are meant to improve dialogue and reduce litigation.

The IRO 2002 (like its predecessor, the IRO 1969) gives employees the right to strike and employers the right to lock out, but it provides for more extensive preliminary conciliation and arbitration proceedings than the IRO 1969. However, the Essential Services Maintenance Act of 1952 restricts union activity in state-administered sectors, including railways, postal services, telephone and affiliated services, and airports and seaports. The IRO specifies the procedure to be followed before a strike can legally be called, although its provisions are not always followed. Certain actions are punishable as unfair labour practices: closure of an establishment without prior permission from the labour court (except for power failure, epidemic or civil commotion); illegal lockouts; illegal strikes; and slow-down tactics.

 

Employment Laws of Pakistan

Industrial Relations Ordinance 2008
This regulation relates to the formation of trade unions, the relations between management and the workforce in avoiding and settling industrial disputes arising between them or related matters.
 
Employees Old Age Benefits Act 1976
The Act is applicable to every industry or establishment where five or more persons are employed. This statute intends to provide security and benefits for old age to employees of industrial, commercial or other organizations covered by it. Recent amendments have extended the applicability of this act for employees of the banking sector.

This was formed to collect and receive contributions, donations, bequests and all other payments. It deals with pensions, invalidity pension, widow's pensions, old age grants and other benefits, out of contribution payable to the Institute by every employer of industry. Contribution shall be payable monthly by the employer to the Institute in respect of every person in his insurable employment, at the rate of five per cent of his wages.

Employees Cost of Living Relief Act 1973
This act entitles the employee a cost of living allowance equal to PKR 100 per month to be paid by the employer.

Workers Welfare Fund Ordinance 1971
Under this Act, an industrial establishment which has a total income of more than PKR 500,000 or more is required under the income tax provisions to pay 2% of its total income to the workers welfare fund ordinance.

The fund is applied to:

  • The financing of projects concerned with the establishment of housing estates or construction of houses for workers
  • The financing of other welfare measures including education training, re-skilling and apprenticeship for the welfare of workers

The Minimum Wages for Unskilled Workers Ordinance 1969
Minimum wages for unskilled workers should not be less than PKR 6,000.

Minimum Wages Ordinance, 1961
Specifies the minimum wage to be paid to different categories of workers

West Pakistan Shops and Establishment Ordinance 1969
This act provides for the wages, leaves, holidays, working hours, overtime, and maintenance leave for employees. it applied to all shops and establishments.

Industrial and Commercial Employment (Standing Orders) Ordinance 1968
The Act specifies that every industrial or commercial establishment, where 20 or more workers are employed, is required to comply with the conditions of the employment of workmen and other matters contained in the standing orders.  An amount equal to the wages of the workers has to be paid during the period of suspension.

The standing orders cover the following matters relating to the employment of the workforce:

  • Compulsory payment of bonus if the employer is making a profit.
  • Compulsory insurance of permanent workman against death, injury or disability not covered under the workmen compensation Act 1923.
  • Terms and conditions concerning the stoppage of work, the closure of the business, terms relating to termination of employment, governing payment of gratuity or other termination benefits.
  • Details of attendance, shift working times, holiday entitlement, terms of wages and group incentives schemes.
  • Working time and Holiday Entitlement in written form.
  • Classification of employees into permanent, temporary, seasonal, probationer roles etc

Provincial Employees Social Security Ordinance, 1965
This Act has been designed to provide comprehensive medical cover to employees and their family members, including parents and to provide financial assistance in case of sickness and employment injuries.

The Social Security scheme is implemented on the basis of contribution. The main source of income is the Social Security Contribution, which is collected under Section 70 of the Ordinance from the employers of the notified industrial and commercial establishment.

Employees earning wages up to PKR 10,000 are required to contribute to the Social Security Ordinance. Employer’s contribution is currently capped at 6%.


Factories Act, 1934
Regulates the working conditions in factories, employing 10 or more workers

Payment of Wages Act, 1936
Determines the mode of payment of salaries and wages to the industrial workers

Minimum Wages Ordinance, 1961
Specifies the minimum wage to be paid to different categories of workers

West Pakistan Industrial & Commercial Employment (S.O.) Ordinance, 1968
Provides the framework and Guidelines for the service rules of industrial and commercial workforce

Punjab Fair Price Shops Ordinance, 1971
Provides criteria for the establishment of fair price shops at industrial units where 100 or more workers are employed

Employment Record of Service Act, 1951
Provides guidelines for the maintenance of service records of workers in industries

Canteen Rules, 1959
It envisages provision of a canteen facility, where 250 or more workers are employed

Industrial Relations Ordinance, 2002
It provides framework for the industrial relations between management and the workers. It regulates trade union activities

Hazardous Occupations Rules, 1978
Gives guidelines for protection of workers against certain hazardous occupations in the factories

Employment of Children Act, 1991
Regulates the employment of children

Maternity Benefit Ordinance, 1959
Provides certain facilities to those female employees, who are expectant

Shops & Commercial Establishments Ordinance, 1969
Regulates the employment and working conditions of workers in shops as well as commercial establishments (such as banks, offices etc.)

Road Transport Workers Ordinance, 1961
Provides guidelines for welfare of transport workers

 

Source:
Deloitte - International Tax and Business Guide / www.deloittetaxguides.com

Board Investment of Pakistan
http://www.pakboi.gov.pk/

 

Working Hours

Under the Factories Act, 1934, no adult employee who is 18, can be required or permitted to work in any establishment in excess of nine hours a day and 48 hours a week.  Similarly, no young person, under the age of 18, can be required or permitted to work in excess of seven hours a day and 42 hours a week. The Factories Act, which governs the conditions of work of industrial labour, applies to factories, employing ten or more workers. The Provincial Governments are further empowered to extend the provisions of the Act, to even five workers.

If the factory is operated on a a seasonal basis, an adult worker shall work no more than fifty hours in any week and no more than ten hours in any day. A seasonal factory under the Factories Act is defined as a factory exclusively engaged in one or more of the following manufacturing processes, namely, cotton ginning, cotton or cotton jute pressing, the manufacture of coffee, indigo, rubber, sugar or tea.

The law further provides that no worker shall be required to work continuously for more than six hours, unless he or she has had an interval for rest or meals of at least one hour.

During Ramadan (fasting month), special reduced working hours are observed.

Source: International Labour Organization.

Termination of Employment

Employee termination can be difficult. Pakistani laws establish procedures for terminating employees, although unions-especially in the public sector-can resist lay-offs. Either the employer or the employee may terminate employment upon serving one month of notice or (for an employer) granting one month of salary. Hourly paid workers who are retrenched must be given either two weeks' notice or two weeks' wages.

 

Wages and Benefits

The Tripartite National Wage Council was set up in 2000 to determine the minimum wage for different business activities, industries and occupations in different provinces.

On the council's recommendations, in October 2001 the government approved PRs2,500 per month as the minimum wage for unskilled workers by amending the West Pakistan Minimum Wage for Unskilled Workers Ordinance of 1969. The minimum wage was given retrospective effect from August 2001, and it applies to all establishments. The new minimum wage included the existing cost-of-living allowance of PRs550-650. Although the figure is higher than the PRs1,500 minimum wage that had been set in 1993, it is lower than the PRs3,000 per month proposed by the government's labour adviser. The government also intends to revise the minimum wage every three years instead of every nine years, as previously.

Nevertheless, the actual average monthly wage had been around this level, since inflation has put increasing pressure on employers to raise wages: the average wage for unskilled workers in July 2004 was PRs3,000, with provisions for a one-day weekend every week on Sunday and a half working day of four hours on Friday before afternoon prayers. In the market of daily-wage unskilled workers, wages are PRs90-185 per day. Mandatory benefits for workers include bonuses, allowances for education of employees' children and pension contributions. Employees are also entitled to 14 days of paid leave plus 10 days of casual leave during each calendar year and 16 days of sick leave at half the daily wage during every 12 months of service. Foreign-owned companies generally provide more generous fringe benefits (such as healthcare, retirement plans and other privileges, including employee-share-ownership plans) than do locally owned firms. The minimum wages in Pakistan might seem low compared with those of many other Asian countries.

 

Minimum Wages

The Government has prescribed the rates of minimum wages to be paid which are as follows:

Category

Minimum wage(Rs. Per month)

Ministerial-A

3,100 to 3,115

Ministerial-B

2,880 to 2,960

Ministerial-C

2,750 to 2,810

Highly Skilled-A

3,100 to 3,190

Highly Skilled-B

2,950 to 3,040

Skilled-A

2,880 to 2,960

Skilled-B

2,800 to 2,855

Semi-Skilled-A

2,600 to 2,660

Semi-Skilled-B

2,550 to 2,600

Unskilled

2,500

Miscellaneous-A

3,050

Miscellaneous-B-I

2,750

Miscellaneous-B-II

2,600 to 2,615

 

Source: Guide "Doing Business in Pakistan" - www.hlbi.com

 

Employment of Foreigners

Pakistan places no restrictions on employing foreigners, and foreign companies may appoint foreign citizens as chief executives in Pakistan. Companies that want to employ foreigners must first seek permission from the government's Board of Investment. This is, however, merely a formality, and usually takes no more than two to three weeks.

Source: Deloitte - International Tax and Business Guide / www.deloittetaxguides.com

For a general overview about employment law in Pakistan visit also:

ILO: National Labour Law Profile - Pakistan

Pakistan Government: Labour Law

Please note that this information was last updated in July 2008. The Information shown is for guideline purposes.  For precise and up-to-date information please contact the IPTU team or visit the country government website. 

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