The International Labor Organization (ILO) recently presented the draft Sindh Labour Code to the Sindh chief minister. The draft was also circulated to the two ILO constituents: the Employers Federation of Pakistan and the Pakistan Workers Federation. The Sindh Labour Department also shared it with a few other workers’ federations. Thereafter, some of the leaders of these federations openly criticized the draft and held protests. The PWF, however, refrained from any public comment or action.
The International Labor Organization (ILO) recently presented the draft Sindh Labour Code to the Sindh chief minister. The draft was also circulated to the two ILO constituents: the Employers Federation of Pakistan and the Pakistan Workers Federation. The Sindh Labour Department also shared it with a few other workers’ federations. Thereafter, some of the leaders of these federations openly criticized the draft and held protests. The PWF, however, refrained from any public comment or action.
The 318-page draft is well-structured and attempts to consolidate the various labour laws. Both the EFP and PWF are not fully supportive of the draft and have had consultative sessions to articulate their suggestions and concerns. The one section that elicited an adverse reaction is that of contract labour. This has long been a controversial subject and formal labour unions have often agitated against the system of contract labour in industrial units.
These days, contract labour is preferred by many companies that are wary of directly increasing their registered workforce for various reasons. Take for example a garment factory that is primarily export-based. Many SMEs, and even some large units, depend on export orders. There is often a possibility that the unit may not get a continuous stream of orders. Hence, it becomes expensive to keep registered workers idle and still pay them their monthly wages and benefits. Employing skilled workers through a third party enables them to control their wage bill and other expenses. Even multinational companies and large domestic companies are now depending on contract labour, which is why there is an increase in the number of third-party manpower services providers.
What really rankles the leaders of worker federations is that many companies, especially SMEs, routinely divide their workforce by designating a number of their workers as ‘contract labour’, ostensibly under a so-called contractor who for all purposes is either a company employee or someone whose name is used for legal purposes. The downside is that these workers are deprived of minimum wage, leaves, bonus, EOBI and social security, etc. The rationale behind this system is mainly to save labour cost. Then there are other contractors who perform their functions in more than one plant. In some units, this system has been prevalent for decades and is taken for granted both by employers as well as the regular workforce.
The CEO of a leading human resource outsourcing services company says that three persons are involved: the principal (or primary employer) on whose behalf an employee will be hired; an employee who is hired by the outsourcing service provider as required by the principal; and the outsourcing services company that hires and administers all associated work, including collection and disbursement of salary on behalf of the principal, only earning a service fee or commission for providing such services. In the CEO’s opinion, there is a misconception about contract labour in a formal plant, and that service providers are fully compliant with all labour laws as well as ILO International Labour Standards.
According to the CEO, formal manpower service providers are duly registered with the SECP, income tax, sales tax, EOBI and SESSI/PESSI, maintain accounts as per Accounting Standards and Procedures, and are properly audited through qualified auditors. They ensure proper agreements and contracts with the principal employer, maintain employee data in the Human Resource Management System, and provide access to employees and managers. They issue employment letters clearly stating terms of employment, check and verify the workers with NADRA, the police, medical, education, and experience records, and register employees with the EOBI, SESSI/PESSI, FBR, etc, and deposit contributions as required under the law, (including EOBI online registration and card preparation of employees).
The said CEO also says that these providers ensure payment of legal wages through payment documentation of employees and ensure timely payment/disbursement of salary and wages through banking channels (including pay-slip distribution to employees). They make timely payments of taxes at appropriate forums and also encourage employees to file tax returns. They assist employees in opening bank accounts, obtaining succession certificates and/or benefits from EOBI, SESSI/PESSI, Insurance, etc. Moreover, they also provide training and development for employees (as required).
The CEO wonders why there is an objection to contract labour if all legal requirements are followed, and all formalities are complied with. He says that manpower/human resource service providers also supervise employees by preparing the work plan/roster, maintaining attendance, managing the factory floor, providing job descriptions, reviewing performance, maintaining quality and OHS records, and even issuing warning/disciplinary letters.
Nasir Mansoor, the general secretary of the National Trade Union Federation Pakistan, is a leading voice against the proliferation of contract labour in industries and corporations. He has decried how the Sindh Labour Code was presented to leaders like him. He says that they were given just two days to review the draft, alleging that this was done with mala fide intentions and that it was a conspiracy to force workers to accept the draft in toto. He states that the main opposition to contract labour is that when these workers are hired to perform tasks that are permanent, then why the temporary nature of the posts?
Mr Mansoor has described the present contract labour ecosystem as unlawful and is of the view that grounds are being structured to legalize contract labour since it is prevalent in most countries. This system is dangerous for the future of workers’ rights, says Mr Mansoor, who also says that 95 per cent of the workforce is working under this system even though it is illegal under the law of the land. He adds that it is common knowledge that 90-95 per cent of employers are still not paying minimum wage and legalizing contract labour would further coerce workers to accept less than minimum wage with no job security.
In an article, social activist Ms Zeenat Hisham said that “there is no specific law [in Pakistan] to protect contract labour, unlike India where the employment of contract workers is regulated by the Contract Labor (Regulation and Abolition) Act 1970 that ensures minimum wages, health and safety, and the provision of some insurance. But due to the lack of implementation, the on-the-ground situation in India is similar to that in Pakistan. Is there any light at the end of the tunnel? Aside from proper legislation, strict implementation, and good governance, only a strong labor movement can safeguard workers’ rights.”
According to the 1998 Report of the ILO Committee on Contract Labor, “Contract labour is understood as covering all situations in which work is performed for a person who is not the worker’s employer under labor law as it now stands, but in conditions of subordination or dependency that are close to an employment relationship under that law.
“Thus, at one end of the spectrum, in fact just beyond the border of contract labour, there are the hidden or disguised employment relationships. In this situation, all of the characteristics laid down in national law for the existence of an employment relationship between a worker and an employer are displayed, but to avoid legal obligations, an attempt has been made to cloak that relationship in another form.”
There are efficiency gains in employing contract labour because the worker is aware that his/her employment tenure lies in performing well and providing value to the given task. This way of working is becoming popular in the US. According to Deloitte, more than 57 million Americans are contractors – about 36 per cent of the workforce. Companies believe that contract labour can help them be more productive and innovative. Businesses are turning to manpower service providers to get the expertise they need, even if it is just for a short time. Hiring and managing regular workers involves various administrative tasks like payroll processing, benefits administration, and tax withholdings.
Corporations are comfortable with manpower service providers since many of these responsibilities are minimized or eliminated because the latter are usually responsible for the taxes, salaries, and benefits of contract labour. Notwithstanding the advantages to employers, it is imperative that workers, whether permanent, temporary, freelancers, or outworkers, are recognized and respected, and their legal rights are safeguarded and remunerated.
Human Resource tech analyst and author, Meghan Biro, has a very pertinent comment to make: “Employees engage with employers when they’re treated as humans worthy of respect”.
The writer is a former president of the Employers Federation of Pakistan.
