Labour laws in Pakistan

LAHORE: The exploitation of workers in Pakistan is largely driven by weak enforcement of labour laws, resistance to unions in the private sector, and the prevalence of a large informal economy.

While textile exporters demonstrate that compliance with labour laws is achievable, extending these standards to other industries requires stronger regulatory frameworks, incentives for compliance, and efforts to address systemic corruption and inefficiencies within labour departments.

On paper, Pakistan’s labour laws are relatively strict when it comes to hiring and firing workers. However, in practice, these laws are frequently ignored, leaving workers vulnerable and unprotected. The country’s labour laws mandate that employers follow strict processes for recruitment, including compliance with quotas such as hiring disabled individuals and adhering to gender equity requirements -- though these laws are often violated. In cases of termination, employers are required to provide valid reasons for dismissal, issue prior notice, or pay compensation. Termination disputes can be taken to labour courts, but this process is often lengthy and ineffective.

In contrast, labour laws in the US are more flexible due to the “at-will employment” doctrine, which allows employers to terminate employees without cause, as long as the dismissal does not violate anti-discrimination laws. Despite this flexibility, US workers are fully protected and compensated for termination rights, something that is not always the case in Pakistan.

New Zealand has stricter labour laws than the US, but they are more balanced. Employers must follow fair procedures, provide reasons for termination, and support an environment of negotiation and conciliation.

Labour unions in developed economies, such as the US and Europe, have seen a decline in membership and influence due to factors like automation, shifts in labour markets, and policy changes. However, unions in key sectors such as transportation, healthcare, and education remain influential.

In Pakistan, labour unions are weak due to employer resistance, fragmented union structures, and workers’ fear of losing their jobs. However, unions are stronger in certain sectors, particularly in public enterprises, where guaranteed job security, political affiliations, and less fear of retaliation contribute to their power. These unions often push for wage hikes, benefits, and job security based on seniority, even when public enterprises are facing financial losses. Mismanagement and corruption within these enterprises exacerbate the problem, further contributing to their financial decline.

Pakistan’s labour departments at the provincial level often lack sufficient resources, training and political will to enforce laws effectively. Corruption and bureaucratic inefficiencies further undermine their role. Labour inspectors frequently focus on smaller businesses while avoiding larger, politically connected companies. As a result, both exploitative employers and non-compliant workers rarely face consequences.

The weak enforcement of labour laws has contributed to the growth of an informal labour market, where businesses operate outside of regulatory frameworks, evading tax liabilities and avoiding legal obligations such as minimum wage, social security, and workplace safety standards. This results in a dual labour market, where formal workers (a minority) enjoy protections, while informal workers (the overwhelming majority) remain vulnerable to exploitation.

Textile exporters, however, comply with labour laws due to pressure from international buyers who require adherence to global standards, such as fair wages, safe working conditions, and the prohibition of child labour. Non-compliance can lead to the loss of contracts or certifications. This compliance is primarily driven by market pressures rather than government enforcement.

In contrast, other industries are not subject to the same international scrutiny. Non-exporting firms often view compliance as an unnecessary expense, particularly in competitive domestic markets. Labour regulators fail to enforce consistent compliance across industries, allowing non-compliant businesses to operate without facing penalties.