PAKISTAN: An Introduction to Employment

Pakistan’s employment legislation primarily regulates the employment of persons with limited negotiating power, such as those employed in manual, semi-skilled or unskilled roles, which such legislation categorises as “workers.” Such statutes are considered to be beneficial legislation, with courts tending to apply them liberally, in favour of the employees.

The employment of persons not protected by such legislation - principally those persons in managerial or supervisory roles - is governed by their respective contracts of employment. It is particularly important for employers to focus on the terms of such contracts, including the applicability of discretionary benefits, termination-related provisions and post-employment confidentiality and non-compete obligations.

The legislative subjects of labour and employment were devolved from Parliament to the Provincial Assemblies in 2010 by the 18th Amendment to the Constitution. Prior to this, both Parliament and the Provincial Assemblies could enact legislation on labour and employment. Following the 18th Amendment, only the Provincial Assemblies can enact such legislation, and any such legislation enacted by Parliament applies only to Islamabad, and in some cases to trans-provincial establishments. Since the 18th Amendment, the provinces have enacted their own statutes, which are, by and large, the same as statutes previously enacted by Parliament. In some cases, such as provincial legislation relating to Companies Profits (Workers Participation), some provincial legislation is markedly more favourable to employees than that of Parliament and other provinces.

The following developments in this sector are noteworthy.

Trans-Provincial Establishments 

The 18th Amendment has given rise to questions concerning the applicability of provincial legislation, which applies only within a province, to businesses that operate in more than one province (trans-provincial establishments). In Sui Southern Gas Company Ltd and Others v Federation of Pakistan and Others 2018 SCMR 802, the Supreme Court held that trans-provincial establishments are subject to the federal industrial relations law. This decision contrasts with the decision of the Sindh High Court in Shafiquddin Moinee and Others v Federation of Pakistan and Others 2018 CLD 1088, holding that trans-provincial establishments were required to apply the respective provincial the Companies Profits (Workers Participation) legislation applicable in province in which they operate. This decision has been challenged in a pending appeal before the Supreme Court. The impact of the 18th Amendment on legislation on the applicability of labour and employment legislation is an issue that continues to evolve. It remains to be seen whether the Supreme Court applies the principle that federal legislation will apply to trans-provincial establishments across the board, or only in respect of certain legislation.

Remote Working 

A global rise in remote working has provided businesses with the opportunity to engage skilled personnel internationally at relatively competitive costs. Pakistan is one of the youngest countries in the world, with two-thirds of its population below the age of 30, and a workforce that is proficient in the English language. These factors, coupled with a high rate of unemployment and an advantageous exchange rate, have resulted in Pakistan becoming an emerging choice for foreign businesses looking to remotely engage a skilled workforce on remote basis at competitive wages. A growing number of foreign businesses have engaged the employers of record (EORs) and professional employment organisations (PEOs) in Pakistan. This allows them to mitigate the risks and liabilities associated with employing such personnel directly, including the performance of HR functions, establishing a commercial establishment, and managing their payroll locally.

Disability  

All provinces have enacted laws regulating rights of disabled persons, including their employment rights. All such laws prohibit discrimination against persons with disabilities. They also mandate that government establishments and some commercial establishments employ a certain percentage of persons with disabilities. In case of failure to employ the required number of persons with disabilities, the establishments must pay the remuneration they would have had to have paid such persons into a fund established by each province. The relevant authorities are, however, yet to implement such laws.

Minimum Wage 

Pakistan is currently experiencing heightened inflation due in large part to the recent devaluation and increase in utility prices. This has severely impacted purchasing power, particularly for lower paid employees. To mitigate this, effective from July 2023, all the provinces in the country increased the minimum wage for unskilled workers from PKR25,000 to PKR32,000.

Maternity and Paternity Leave 

Recently, the Maternity and Paternity Leave Act 2023 was passed by Parliament. This is a significant development on the subject to maternity and paternity laws, being the first instance where paternity leave has been given legal recognition in Pakistan. This law only applies to establishments under the administrative control of the Federal Government. There is currently no provision for paternity leave under the relevant laws applicable in the provinces.

Workplace Harassment 

Parliament recently enacted the Protection against Harassment of Women at the Workplace (Amendment) Act in January 2022 which is applicable to Islamabad. The amendments expanded both the definition of the term “workplace harassment” and the scope of persons to whom it applies. Prior to the amendment, the legislation applied only to sexual harassment. The amendments have expanded this to include gender-based discrimination. A landmark decision by the Supreme Court that followed the amendments found that the definition of “harassment” prior to the amendment included gender-based discrimination. This judgment will significantly impact ongoing cases instituted prior to the amendment.

Home-Based Workers 

Like many other developing countries, the participation rate of home-based labour force is gradually rising in Pakistan. Home-based workers in Pakistan work in a variety of industries making goods like garments, embroidery, footballs, jewellery, shoes, and food. They are commonly employed through contractors and paid by the piece. Home-based workers were treated as independent contractors and thus not entitled to rights and benefits applicable under employment laws. The provinces have recently enacted legislation on home-based workers that recognises them as employees, entitles them to unionise and collectively bargain, social protection and to resolve employment disputes by statutory arbitration.