Statutory Benefits Admissible to Workers under Pakistani Law

When engaging in business activities in Pakistan, employers should be mindful of the following statutory benefits admissible to Workmen under Pakistan's Employment Law:

Minimum Wage: After the 18th Amendment, the Concurrent Legislative List (CCL) was abolished, and provincial legislatures became the competent forum to legislate on the subject of minimum wages. Currently, the minimum wage rate is determined by the respective Provincial Governments on the recommendations of the respective boards. The current minimum wage applicable in all the provinces is set at PKR 32,000, with the only exception of Sindh Province, where the Provincial Government has yet to approve the recommended minimum wage of PKR 32,000.

Employee Old Age Benefit Institution (EOBI): EOBI is a retirement benefit scheme that provides workers with a monthly pension upon retirement. Employers are required to contribute 5% of an employee's salary to EOBI, while employees contribute 1%. Contributions are calculated on the minimum wage, which is currently PKR 32,000 per month. For example, an employer would contribute PKR 1,600 per month to EOBI for an employee whose salary is PKR 32,000. Although the subject has been devolved to provinces, due to an ongoing dispute, the federal EOBI institution continues to collect contributions and disburse pensions to the Employees.

Social Security: Social security is a social insurance program that provides workers with financial assistance in the event of illness, maternity, disability, or unemployment. Employers are required to contribute 6% of an employee's salary to social security if the employee's salary falls between PKR 32,000 and PKR 37,000 per month. The contribution is collected by provincial Employees Social Security institutions.

Education Cess: Education cess is a tax that employers are required to pay on behalf of their employees. The current rate of education cess is PKR 800 per year. This contribution is also collected by the provincial Social Security institutions.

Group Life Insurance: Employers are required to provide their employees with group life insurance cover from a reputable Insurance Company, with a death coverage of up to PKR 500,000.

Gratuity/Provident Fund (PF): Employers are required to provide their employees with either gratuity or provident fund. Gratuity is a one-time payment that is equal to one gross salary for each completed year of service. PF is a savings scheme that provides employees with a lump sum payment upon retirement. Employers and Employees are required to jointly contribute 8.33% of an Employee's gross salary to PF. An employee becomes eligible for Gratuity / PF Fund only after a completed year of service. An employer has to provide the cover once the services of an employee are separated by way of termination or resignation.

Disbursements under the Workers' Profit Participation Funds (WPPF): Workers in industrial establishments are entitled to a share of the profits of their employer. The current rate of profit participation is 5% of the employer's net profits. However, this scheme only applies to industrial establishments only.

Maternity Benefits: Female employees are entitled to 90 days of maternity leave. Female employees on maternity leave are protected from dismissal.

Note: Only employees falling within the ambit of Workmen are entitled to Minimum wage, Social Security, Group Life, Education Cess and WPPF. For those which do not fall within this category, their relationship is governed by their respective Contracts of Employment.