Minimum Wage Trends

Since 2022, Pakistan has seen skyrocketing inflation of 40% year on year and a 30% depreciation of the Rupee between January and June 2023. As a result, Provinces have sought to impose minimum wage increases of similar proportions. In 2022, the minimum wage for unskilled labour was increased across all Provinces from PKR17,500 to PKR25,000 (a 42% increase). This year, the minimum wage in the Islamabad Capital Territory has increased to PKR32,000 effective from 1 July 2023, with the Provinces contemplating equivalent or greater increases. 

Laws for the Protection and Inclusion of Women

Pakistan has recently seen several legislative measures aimed at increasing the economic participation of women, as well as ensuring their protection at the workplace from sexual harassment. A landmark judgment of the Supreme Court, authored by Pakistan’s first female Supreme Court judge, Justice Ayesha Malik, in the context of sexual harassment in the workplace laws, has further widened the scope of the law and the powers of the Ombudsman constituted thereunder, with retrospective effect.

Workplace harassment law

Since its inception, the Protection Against Harassment of Women at the Workplace Act 2010 was restricted in its purview to “sexual” forms of harassment, with several judgments of the Superior Courts on this point. In 2022, amendments were legislated to this law which, amongst other changes which significantly widened the scope of the law, included “gender discrimination” within the definition of “harassment”. This was defined as discrimination on the basis of gender embodying a discriminatory mindset (irrespective of being sexual in nature), as well as “sexually demeaning attitudes, conveying derogatory connotation”. In addition, the definition of “employee” was enlarged to include casual workers, interns and other non-traditional modes of working within the scope of the law. The definition of “workplace” was expanded to include “any place where services are rendered or performed by professionals”, including educational institutions, gigs, concerts, studios, performance facilities, courts, highways, sporting facilities and gymnasiums and any situation linked to work or activity outside the office.

While the above legislative amendments were effective from 21 January 2022, a controversial Judgment of the Supreme Court in its review jurisdiction, authored by Justice Ayesha Malik dated 6 June 2023, has now held that the definition of “harassment”, even prior to the 2022 amendment, included gender-based discrimination and earlier the Judgment under review did not give the words “sexual harassment”their due deliberation. It was held that “harassment” includes behavior which is promoted on account of gender as a result of gender-based power dynamics, which is not necessarily a product of sexual desire or sexual activity. “Harassment”, as understood in this context, was held to include exploitation, humiliation and hostility, all of which would amount to actionable gender-based harassment. It was further held that the Ombudsman and courts are required to give “due emphasis” not only to the objective behavior of the accused but also, particularly, the subjective perception of that behavior by the complainant.

It is expected that the above judgment will have significant ramifications on the number and nature, not only of new cases filed before the Ombudsman constituted under this special law, but also on ongoing cases which were to date proceeding based on the narrower definition and scope of “harassment”.

Female workers in factories and commercial establishments

Legislation governing labour laws in factories is within the domain of Provincial legislature, with laws across Pakistan prohibiting women working in factories in night shifts until recently. However, amendments have been made to the factories’ legislation in Punjab and Sindh in recent times, whereby women have been permitted to work the night shift in factories, provided that adequate transportation facilities are provided to them by the employer.

The same prohibition has been removed from non-factory commercial establishments (such as shops and offices) in Sindh; however is still in effect for such establishments throughout Punjab. 

Home-based workers

In this context, “home-based work” refers to the production of goods or rendering of services in the worker’s home or premises other than those of the employer. This work is particularly common in Pakistan in the textile sector, and until recently, such home-based workers, who are primarily women, have generally fallen outside the ambit of enforcement of labour laws given that they do not work within the physical premises of the particular factory.

Since 2018 however, all four Provinces of Pakistan have promulgated laws for the protection of home-based workers and outlining a system of registration and enforcement to protect the employment rights of such workers. The primary issue with this legislation lies in the practical enforcement which previously was the main challenge in bringing home-based workers within the ambit of the law. Locating and empowering home-based workers is a resource-intensive exercise which to date has mostly been shouldered by the NGO sector.

Parental leave and daycare

Maternity leave has been mandated in Federal law since 1958 and more recently in Provincial law (after the 18th Amendment to the Constitution whereby the subject of labour law was devolved to the Provinces). Under these laws, maternity leave in Pakistan ranges between 12 weeks to 16 weeks. On 20 June 2023, the President of Pakistan signed into law the Maternity and Paternity Leave Act 2023, which for the first time introduced paternity leave into Pakistan law and provides for six months of maternity leave. This law, however, is limited in its scope to be applicable only to “establishments under the administrative control” of the Federal Government.

Since 2018, the Province of Sindh has required all establishments with over 10% female employees to establish day care centres on the premises. However, the implementation of this law has remained almost virtually non-existent to date. On 20 June 2023, along with the above law on maternity and paternity leave, President Arif Alvi signed the Day Care Centres Act 2023 into law, which extends to the Islamabad Capital Territory and requires all establishments having over 70 employees to establish day care centres on their premises.

Outsourcing of Labour

The outsourcing of labour has been an increasingly pressing issue in Pakistan labour law for the last two decades, with the Supreme Court having narrowed the limits of permissible outsourcing in several landmark judgments, with the hallmark being the Fauji Fertilizer case. These issues are most widely experienced in the manufacturing sector, with the outsourcing of production-related work coming under increased scrutiny by the courts and in some cases being prohibited under Provincial legislation such as the Sindh Factories Act 2015. However, regularisation proceedings by contractors’ workers against service takers are seen across the board, including the financial services, utilities and oil and gas industries.

A series of tests have been laid down based on the traditional legal tests for determining the existence of an employment relationship, similar to those in the United Kingdom in independent contractor verses employee litigation. Courts have tended to examine not just the contents of the contracts for services but have relied primarily on the on-ground practices, to determine whether a particular outsourcing arrangement was a genuine contract for services, or the reality was such that a contract of service could be inferred between the relevant worker and the service taker.

Workers’ Profit Participation Laws

Industrial establishments in Pakistan are required to pay 5% of profits to a workers’ profit participation fund (WPPF) constituted for the benefit of their workers, and are required to distribute this 5% to eligible workers in accordance with the disbursement mechanism set out in the respective WPPF legislation. At this time, WPPF payments are in a state of flux, with the interplay and applicability of Federal and Provincial WPPF laws to those companies which have operations in more than one Province (termed as trans-provincial companies) being subjudice before the Supreme Court. The applicability of the respective Provincial laws to such trans-provincial companies has been challenged on the basis that only the Federal legislature is empowered to enact laws in respect of such companies, under Entry No. 27 (inter-provincial trade and commerce), Entry No. 13 of Part II (inter-provincial matters and coordination) and Entry No. 31 (Corporations) of the Federal Legislative List of the Constitution of Pakistan.

The interplay between Federal and Provincial laws in the WPPF context is expected to have important ramifications in the context of Pakistan labour laws, which after the 18th Amendment to the Constitution of Pakistan were devolved to the Provinces. An important exception to the devolution of labour law as a subject was set out in the Supreme Court judgment in the case of Sui Southern Gas Company & others v Federation of Pakistan (reported as 2018 SCMR 802), in the context of industrial relations laws, wherein it was held that a provincial legislature has authority to legislate only with respect to workers of organisations carrying on business only within that province, and not to workers of trans-provincial organisations. The outcome of the WPPF legislation is awaited to determine whether another important carve-out will be made by the Supreme Court in the context of labour laws applicable to trans-provincial organisations.

Employee Trusts Registrations

Prior to 2020, the only law applicable to trusts in Pakistan was the Trusts Act 1882 which required only trusts of immovable property to be compulsorily registered. In 2020, in compliance with the Financial Action Task Force (FATF) recommendations, the Provinces and the Islamabad Capital Territory enacted their own respective legislation on trusts and repealed the Trusts Act 1882. The new legislation, while largely identical to the repealed Act, contains one major change, namely the compulsory registration of trusts of movable property. This requirement has had significant implications in the context of employee trusts such as provident funds, gratuity funds, pension funds, and workers profit participation funds, which are widely used by employers in light of the tax benefits they make available.

Employers seeking to register trusts with the applicable Provincial authorities face significant red tape and requests for information about the personal assets and dependents of trustees, who are usually senior employees or executives of the said companies. While the Province of Sindh amended the law in 2021 to introduce certain exemptions for “specialized trusts” which are defined to include employee benefit trust funds, in practice such exemptions have been hard to come by and companies continue to face practical challenges in trust registrations. This has led to impediments in the running of bank accounts for those trusts as well as, until recently, renewal of the Federal income tax exemptions of the trusts, availed from the Federal Board of Revenue (FBR).

In a recent Judgment dated 7 March 2023, the High Court of Sindh at Karachi held that the imposition of trust registration requirements by the FBR in approving income tax exemption renewals was illegal as this was not a precondition for income tax exemptions for employee trusts under the Income Tax Ordinance 2001. This is likely to give significant relief to companies; however, banks continue to require said registrations, warning that continued non-compliance would lead to the closure or blocking of non-compliant trust bank accounts. 

Occupational Health and Safety

Some form of occupational health and safety (OSH) requirements were previously integrated only into labour laws applicable to factories, mines and dock labourers, with remaining workplaces falling outside the ambit of any OSH standards. This deficiency was addressed with the introduction of OSH legislation in the Provinces of Punjab, Sindh and Khyber Pakhtunkhwa since 2018. This has led to a strengthening of the overall OSH enforcement framework even in factories where legislation previously existed, but not in the form of the reporting requirements and specialised enforcement mechanisms introduced by the newer OSH legislation.

The main deficiency with this additional legislation is that it strengthens controls for only those factories which even previously existed within the system which were already subject to the checks and balances of the Labour Departments and were largely compliant with OSH. The primary culprits of OSH violations however have historically been those illegal factories which have never existed as registered establishments with the Labour Departments and where there is virtually no system of OSH compliance.