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LABOUR POLICY 2002

FOREWORD

Since independence, four labour policies have been announced by the government in the years 1955,
1959, 1969 and 1972, which laid down the parameters for the growth of trade unionism; the
protection of workers' rights; the settlement of industrial disputes and the redress of workers'
grievances these policies also provided for compliance with international labour standards ratified by
Pakistan.

2. Historically, the 1960s and the 1970s were a turbulent period in the history of Industrial Relations
in Pakistan Militant trade unions and equally intransigent managements were locked in endless
disputes and conflicts over pay and working conditions. Strikes, go-slows, lockouts and litigations
were the most distinctive features of employer employee relations. The concept of employers and
employees working together in close co-operation to ensure productivity, profitability and growth of
businesses and security of employment was largely non-existent. There was no realization that job
security and appropriate wages were critically dependent on profitability and ,continued
competitiveness of businesses.

3. The atmosphere of mutual hostility and distrust, though considerably diminished, continues to
bedevil industrial relations to this day. As a consequence, both the entrepreneur and labour, in fact
the economy of the country as a whole have suffered greatly. But, perhaps, labour has suffered, most
on account of increasing unemployment and declining real wages as both public and private sector
businesses have increasingly' resorted to cutbacks, relocation, closures, contract employment and
outsourcing in an effort to maintain profits and to counter pressure from trade unions. These
difficulties have been compounded by exploding population and influx of Afghan refugees which have
further aggravated unemployment and depressed the job market.

4. The progressive globalization of economy is brining forth even more formidable challenges and
pressures. Successive governments, torn between conflicting desires for promoting welfare of the low-
income classes and requirements of global competition, have had the unenviable task of balancing
demands for better wages and decent working conditions on the one hand and maintaining business
competitiveness on the other whi-a at the same time ensuring increased revenues.

5. Today, however, a different scenario is emerging. Sobered by the negative experiences of

adversarial industrial relations over the past decades, trade unions are increasingly discarding

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militancy while employers are recognizing the need and benefits of co-opting labour as partners-in-
productivity. Both employers and trade unions are progressively getting involved in bilateral dialogue
as there is a growing realization that common interest of both employers and employees is best served
by securing business profitability and growth. Enlightened elements within labour and employers
organizations have come together to form the workers Employers Bilateral Council of Pakistan
(WEBCOP) and issued a joint declaration to fully respect each other's rights WEBCOP emphasizes the
need for an organized and sustained dialogue between employer and labour organizations based on
bilateralism where the government adopts the role of a facilitator.

6. The Constitution of Islamic Republic of Pakistan and international labour standards render definite
obligations upon the State for the realization of human rights for all citizens, equally f6r men and
women, young and old, Muslims and non-Muslims. In acknowledgement of these obligations, a new
Labour Policy has been formulated (as the first after 1972). This Policy will guide administrative, legal
and judicial actions of government, employers and workers in realizing labour rights and their welfare
alongwith promotion of social justice. The Government believes that such collective commitment to
equity is necessary to achieve and sustain rapid economic growth in a globalized economy.

7. The Government's vision for a new Labour Policy focuses on dignity of labour, strengthening
bilateralism, elimination of animosity and antagonism by fostering a trust-relationship between
employer-employee and promoting social dialogue. The Government is firmly of the view that both
industrial growth and decent working conditions can be achieved only through peace and tranquility
in the industrial sector. This is only possible if there is an awareness and understanding between
workers and employer of their reciprocal rights and obligations with all-round commitment to higher
productivity.

8. After an extensive tripartite dialogue and consultation, conducted over many months, a consensus
has evolved regarding the future shape and course of industrial- elations in Pakistan. In the light of
this consensus, our Labour Policy has been developed within the following framework of Objectives
and Initiatives:

(1) Support to bilateral and tripartite mechanisms for' policy formulation, self-regulation, and
peaceful resolution of disputes.

(2) Regulatory authority of government to be exercised only when bilateral mechanisms fail to resolve
disputes.

(3) Consolidation/simplification of labour laws.

(4) Structural legislative changes to provide easy access to speedy justice in the labour sector.

(5) Promotion of employee's social security and social insurance programmes and improvement of
labour welfare institutions namely; Workers Welfare Fund, Employees Old Age Benefit Institutions

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and Provincial Employees Social Security Institutions.

(6) Progressive extension of labour laws and welfare measures to informal and unorganized sectors.

(7) Special emphasis on workers' children education.

(8) Combating child and bonded labour.

(9) Elimination of gender discrimination to reinforce gender equality.

9. In order to attain these objectives and build upon these initiatives, concerted action by employers,
labour and government is necessary. On its part, Government pledges to take prompt and
comprehensive actions.

10. The Government is both proud and grateful to have based this Policy on broad-based
consultations with labour and employers, especially through the national Tripartite Labour
Conference held in July, 2001. Only a sustained collective effort by workers and employers will ensure
that the future Governments' renew commitment to this Policy by continuing with time bound actions
for achieving major objectives of this Policy.

11. The contribution and effort of the team at the Ministry of Labour led by the Secretary, Mr. Farhat
Hussain as well as the inspiration provided by the "Late Mr. Omar Asghar Khan" is deeply
acknowledged.

(OWAIS AHMED GHANI)

Minister for Labour,

Manpower & Overseas Pakistanis

Bilateralism is the core element of the new Labour Policy. The principles, objectives and action
programme of the policy concentrate on the creation of relationship of trust and co-operation
between employer and employees under the strategy of least intervention by the state. A visionary
approach adopted in the Labour Policy is a focus on dignity of labour, fair balance of bargaining
power and productivity-based work culture with fair and equitable distribution of gains and proceeds
of the industry amongst employees, entrepreneurs and the society at large.

BACK GROUND

A fairly elaborate labour market regulatory and ins-titutional framework was evolved during the
British Rule in India prior to independence of 1947. In the post-independence period this system was
adopted by Pakistan to regulate industrial relations. The crucial area of concern for the Government
was to provide a strong base for industrialization and economic development.

2. At the time of partition, the law on the statute book to regulate relations between employers and

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employees was the Industrial Dispute Act, 1947. This pre-partition Central Act, for the first time
recognized that workers have rights other than those conferred by contract and/or the ordinary law of
master and servant. This Act held the field till the promulgation of the Industrial Dispute Ordinance,
1959 (IDO) enforced by the first martial law regime. The next piece of legislation was the West
Pakistan Industrial Disputes Ordinance, 1968 that repealed the IDO. The said legislation was replaced
within a short time by the Industrial Relations Ordinance, 1969 (IRO).

3. Landmark changes in industrial relations system were made consequent upon the announcement
of third Labour Policy in' 1969: This policy resulted in the intro-duction of legislation guaranteeing
freedom of association and the right to collective bargaining in accordance with ILO Conventions 97
and 98 ratified by Pakistan. A system of equitable distribution of gains was put in place in the form of
enactment of laws relating to workers welfare and minimum wage of workers. Further reforms in the
system of labour legislation were made as a result of the fourth Labour Policy of 1972, which
envisaged 'workers participation in the management, extension in the scope of labour laws,
enactment of laws relating to employees old-age benefits, workers children education, introduction of
statutory bonus and group insurance schemes, establishment of quasi judicial body namely; National
Industrial Relations Commissions and the procedure for redress of workers individual grievances.

4. It was generally perceived by employers that the Labour Policies of .1969 and 1972 were heavily
titled in favour of labour. Consequently industrial relations balance was disturbed. Employers were
further aggrieved by the 1970s Nationalization Policy Several issues that surfaced as a consequence of
the changes were; the employers demand for power of hire and fire; the role of outsiders in trade
unionism; low productivity; multiplicity of trade unionism and endless litigation between workers
and employers due to unfair labour practices.

5. In the subsequent years need was keenly felt to reform industrial relations in order to restore
investors' confidence by bringing balance and; Harmony m employer-employee relationship. H
number of efforts were made by successive Governments in this direction. Three tripartite labour
conferences were held in the years 1977, 1980 and 1988 and two commissions namely; Labour
Commission of 1978 and Labour Welfare Commission of 1987 were set up for suitable
recommendations to address the issues. Also, two 'Task Forces, one on social security and the other
on labour were formed in 1993. However, despite detailed recommendations of these bodies, no
consensus could be evolved amongst labour and employers on key issues.

6. Lately, a change in outlook and approach has been witnessed. The Commission on Labour Laws
established in 1999, presented its report to the Government in September, 2000. It recommended
consolidation of existing labour laws into the following six broad categories:-

Law relating to industrial relations.

Law relating to employment conditions

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Law relating to wages.

Law relating to human resource development.

Law relating to occupational safety and health.

Law relating to labour welfare and social safety net.

7. Another significant development that took place was the holding of the 24th Pakistan Tripartite
Labour Conference on duly 30-31, 2001 after a lapse of 13 years, which culminated into useful
recommendations for legislative, institutional and administrative reforms to meet the emerging
challenges of the time. This Conference was also preceded by the announcement of a package of
labour reforms on April, 30, 2001. The measures/initiatives under the package were given legal
coverage by amending laws to introduce basic changes of far reaching effects.

8. These Government of Pakistan's fundamental commit-went to the democratization of the State

provided for the promotion of universal principles of equality and social justice as well as
constitutional and international rights of labour. In order to fulfil obligation under the Constitution as
well as under relevant international labour standards, the need for the enunciation of a new Labour
Policy was imperative. The challenge, however, lay in workable design of the policy that ensured a
harmonious working relationship between labour and employers for promoting productivity,
competitiveness and growth of industry.

9. The text of the Labour Policy, 2002 that follows consists of two parts, Part-I Principles, Aims and
Objectives; and Part-II; Action Plan.

LABOUR POLICY 2002

Part-1

PRINCIPLES, AIMS AND OBJECTIVES

Policy Foundations:

10. Fundamental rights concerning labour as laid down in the Constitution of Islamic Republic of
Pakistan and international labour standards as enunciated in ILO Conventions ratified by Pakistan
provide necessary framework for evolving a sound and stable mechanism for ensuring Core Labour
Rights. The labour laws and the system of labour administration in Pakistan will thus be brought in
conformity with these standards to meet national objectives and international obligations.

Bilateralism:

11. The traditional environment of mutual antagonism and mistrust between employers and labour

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has adversely affected investment, business profitability and growth, all of which are crucial elements
for ensuring security of employment, decent wages and social security for the labour sector. The
Government keenly feels the need to foster an employer employee relationship based on trust and
partnership. For this purpose, the Labour Policy aims to enhance the required social dialogue
between the labour and employers by facilitating and nurturing bilateral mechanisms for negotiations
and mutual co-operation. The creation of WEBCOP (Workers and Employers Bilateral Council of
Pakistan) by the enlightened employers and labour leaders of Pakistan is a pioneering effort, and a
positive development in this respect. The Government fully supports this initiative and will promote
steps which aid such efforts. The regulatory authority of Government will be exercised only when
bilateral mechanisms are demonstrably unable to resolve conflicts and issues.

Bilateral codes of conduct:

12. The Government as a facilitator shall persuade workers and employers organizations to evolve
bilateral codes of conduct at the level of enterprise and industry which should lay emphasis on: (a)
respect for reciprocal rights and obligations of both the parties; (b) communication between
management and CBA and (c) enhanced confidence in unions to play positive role in organizational
performance.

Consolidation of Labour Laws:

13. The existing voluminous labour legislation is overlapping it Sts coverage in several areas and
anomalous in definitions and scope. The variety and complexity of labour laws has contributed
adversely to industrial relations system. There is, therefore, the need for rationalization consolidation
of the existing laws. It is proposed to simplify ant consolidate these laws into following six basic laws:

(1) Industrial Relations Ordinance.

(2) Conditions of Employment Ordinance.

(3) Wages Ordinance.

(4), Human Resource Development Ordinance.

(5) Occupational Safety and Health Ordinance.

(6) Labour Welfare and Social Protection Ordinance.

Promotion of Healthy Trade Unionism:

14. Healthy trade unionism based on freedom of association and an effective collective bargaining
system is a pre-requisite for industrial peace, productivity and socio-economic uplift of labour. An
environment for growth of healthy and responsible trade unionism will be created by encouraging
responsible and representative trade unions.

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Strengthening Social Dialogue Mechanism:

15. The system of bilateral and tripartite social dialogue shall be strengthened and streamlined to
promote industrial peace and harmonious labour-management relations.

Labour Judiciary:

16. Labour Judicial System will be restructured and simplified and minimized to provide speedy
justice.

Social Safety Net:

17. Institutions responsible for social protection, social insurance and labour welfare need to be made
fully autonomous an effective by restructuring their respective management boards to ensue adequate
labour and employer representation and to strengthen the tripartite character. Policy-making, co-
ordination and monitoring of the fun-ctioning of these institutions will be entrusted to these tripartite
boards exclusively.

Elimination of Gender Discrimination

18. There is need to improve the role and contribution of women in the labour force and to provide
them equal opportunities for employment. The work places will be made conducive for women
workers. The principle of equal pay for work of equal value has been adopted with the ratification of
ILO Convention 100, to promote gender equality in terms of the pay/wage system.

Workers' Children Education

19. The existing unjust two-tier system of education in the country has created a system of apartheid
in society wherein the children of low-income groups are effectively deprived of access to good quality
education thus preventing uplift of the deprived classes. Workers' Welfare Funds and Education Cess
Funds will be utilised to establish quality educational facilities in all districts of the country for
providing free education up to matric and intermediate levels to workers' children. Also, a system of
merit scholarships for higher education will be put in place.

Elimination of Child Labour and Bonded Labour

20. Targets and activities set out in the National Policies and Action Plans to Combat Child Labour
(May 2000) and for Abolition of Bonded Labour (2001) need to be actively implemented.
Additionally, Pakistan, by ratifying ILO Convention 182 has accepted the obligation to enhance age
limit to 18 years in respect of worst forms of child labour, for entry into the labour market.

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Workers in the Agriculture Sector

21. About one half of the employed labour force is engaged in the agriculture sector. An inter-
ministerial committee shall be constituted to formulate a package of labour welfare measures for the
employees in the agriculture sector. The committee shall make recommendations, in the first
instance, for provision of certain benefits to the workers in corporate agriculture farming.

Informal Sector and Home-based Workers

22. About two-third of the non-agriculture employed labour force in Pakistan in informal Sector. A
large number, especially women are engaged in home-based work. Currently, the labour in the
informal as well as the home-based sector is not covered by any labour welfare legislation. The Labour
Policy aims at gradual extension of coverage of labour welfare laws to the workers of the
informal/home-based sector.

Seasonal Workers

23. The seasonal workers are generally not benefiting from labour welfare laws. The Government will
take steps to extend appropriate social protection to them.

Regulation of Contract Work

24. The rights f contract labour in an establishment will be protected through a written agreement
between the employer and the contractor, lying down responsibilities and liabilities of either or both
of them in this regard. A system of licensing of contractors will be introduced so that contract workers
are covered by labour laws and qualify for labour welfare measures.

Rights of Workers in the Event of Privatization

25. The Government ;hall take appropriate measures' to protect the rights of workers in the event of
privatization of public sector units.

Challenge of Globalization

26. Globalization is a challenge for the developing countries. An inter-ministerial committee shall be
formed to address issues such as social accountability, arising out of globalization.

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Labour Welfare Levies

27. Different channels are operating at present for collection of labour welfare levies and distribution
of corresponding benefits to the employees. Measures will be taken to streamline collection of levies
and distribution of inconvenience.

Sections 2-A and 27-B

28. Section 2-A in the Service Tribunal Act, 1973, excludes the workers in public sector from the
purview of labour laws/labour court Section 27-B in the Banking Companies Ordinance, 1962,
prohibits a not employee to hold the office in the executive of a trade union. The, provisions have been
resisted by the workers and their organisations. The Government will address the legitimate concerns
of all stakeholders.

Human Resource Development

29. In order to meet the challenges of a globalized economy, f educated and skilled labour force has a
critical role to play. There is an urgent need to strengthen programmes of workers training and re-
skill ing new and multiple trades for facilitating entry in the labour market; hue, nationally and
internationally. The role of Skill Development Council (already established) shall be strengthened in
this context.

Occupational Safety and Health

30. Occupational safety and health of labour is required to be given the, highest priority. A law
covering all workplaces will be enacted and a National Tripartite Occupational Safety and Health
Council will be established to meet the objective of providing adequate safely and ensuring
compensation to workers.

Labour Research.

31. Research in labour related disciplines and labour administration training is necessary for
improvement of the system and up gradation of the personnel. Measures shall be taken to promote
research and training activities on most modern lines to meet the present day requirements. This will
be achieved by re-organizing the existing research and training institutes.

Labour Market Information System (LMIS)

32. The formulation and implementation of Policies needs to be based on comprehensive, reliable
data and timely information on characteristics of the labour force and various features of the job

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market. Labour Market infor-mation System (LMIS) will provide, on a continuous basis, information
on employment/unemployment, job market re quirements and future projections regarding evolution
of the job market.

Part-II

ACTION PLAN

Industrial Relations

33. The law relating to industrial relations will be revised in the light of provisions of the Constitution
of Islamic Republic of Pakistan and International Labour Standards to make it fully consistent with
the international recognized rights of labour. Some of the salient features of the new Industrial
Relations Ordinance are as under:--

(i) A Tripartite Board of Conciliators shall be con-stituted to conciliate in industrial dispute where
more than one establishment are involved or industry-wise trade union or a trade union at the
national level is a party

(ii) On failure of conciliation proceedings in industrial dispute in a public utility service, the dispute
shall be referred for arbitration to a Board of Arbitrators.

(iii) The phrase "notice of conciliation". shall be substituted to replace the "notice of strike or lockout"

(iv) The tenure of a CBA shall be extended from two to three years.

(v) Joint Management Board and Works Council shall be replaced by a Single body, namely Joint
Management Council.

(vi) Conviction on criminal offences of a heinous nature such as theft, physical assault, murder,
attempt to murder etc. shall be made the bass of disqualification of a person from being a member or
office bearer of a trade union.

(vii) The penalty of imprisonment shall be dispensed with under the law relating to industrial
relations. The amount of fines shall, however, be enhanced suitably to make the law deterrent.

(viii) The terms "employer", "Establishment" and "industry" shall be re defined.

34. In the context of industrial relations more emphasis will be placed on promotion of bilateralism.
The Government will take the following measures in this regard:--

(i) Support and strengthen initiative/mechanism for bilateral cooperation such as WEBCOP based on
a trust relationship between employers and labour leading to greater efficiency and productivity.

(ii) Workers and employers will be encouraged to evolve bipartite codes of conduct at the national

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level and at the level of the industry to promote trust relationship and resolve issues bilaterally.

(iii) The role of the state to act as facilitator will be strengthened.

(iv) District Tripartite Labour Committees will be set up in pursuance of Devolution Power Plan to
coordinate with different: agencies at District level to ensure implementation of labour laws and
different schemes of the Government relating to labour welfare.

Consolidation and Rationalization of Labour Laws

35. Currently there are a large number of Labour laws and Rules and-Regulations which cover a
variety of subjects relating in scope anti content. It is proposed to consolidate them into the following
six categories:---

(a) Law relating to industrial relations

(b) Law relating to employment conditions

(c) law relating to wages

(d) Law relating to human resource development.

(e) law relating to occupational safely and health.

(f) Law relating to labour welfare and social safety yet

Labour judiciary

36. The status of Labour Court will be upgraded and given the jurisdiction to adjudicate in labour
cases as Court of first instance. The Labour Appellate Tribunals will be abolished and the appeal
against the order of the Labour Court shall lie in the High Court.

37. To harmonize labour-employer relationship, a Labour court while-determining the case relating to
the termination of a workman, shall also have the power to award equitable compensation to the
aggrieved workers in lieu of reinstatement into the service.

38. National Industrial Relations Commission shall be revamped and its functions and performance
will be reviewed.

Conditions of Employment

39. The consolidated law relating to conditions of employment shat: be made applicable to every
industrial and commercial establishment employing 10 or more workers.

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40. The law will however provide flexible working hours to the business community, to meet the
needs of the society.

41. Pakistan has ratified ILO Convention 182 which seeks to prohibit and, eliminate the worst forms
of child labour. A child under the Convention has been defined as a person below the age of 18 years.
Relevant provisions in the new law will be incorporated to give effect to the Convention 182.

42. The rights of the contract labour in an establishment shall be protected by providing for an
agreement to be recorded in writing by the employer with the contractor laying down responsibilities
and liabilities of either or both of them in that respect.

43. Employers will be encouraged to engage workers on contract for peripheral, casual and temporary
jobs. A licensing system for contractors shall be introduced in this regard.

44. The fees for registration of shops and establishments as prescribed under the law shall be
reviewed, revised and re-fixed

Wages

45. The Federal Government shall review every three years minimum wages of workers in
consultation with the National Tripartite Minimum Wage Council in keeping with economic
conditions in the country.

46. Pakistan has ratified Convention 100 concerning equal pay for men and women for work of equal
value. A fair wage clause in respect of male and female workers will be introduced in the law to give
effect to the Convention.

Occupational Safety and Health

47. The law relating to occupational safety and health and working conditions shall be consolidated
and updated in the light of the latest developments in industry and technology.

48. A National Occupational Safety and Health Council shall be established to set OSH standards as
review them periodically to make the same up to date to meet the needs of the industry.

Transport Workers

49. The existing law relating to transport workers needs to be updated with a view to providing better
protection to transport workers alongwith safeguarding the interests of the transporters.

Human Resource Development

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50. A need-based vocational training and human resource development programme shall be lunched
to provide vocational training in multiple trades for new entrants in the labour market and on job
workers.

51. The law relating to apprenticeship, vocational training, rehabilitation of disabled persons, etc.
shall 'be consolidated and re-enacted as a law namely, the Human Resource Development Ordinance,
to meet the challenges of new technology and present and future requirement of the industry. The
role of Skill Development Councils shall be clearly defined under the new law.

52. The institutional arrangement to associate employers and workers in human resource
development including planning and management of vocational training through the Skill
Development councils in all the four provinces and the capital territory of Islamabad as employers-led
autonomous organizations will be strengthened.

Social Insurance

53. A comprehensive Social Insurance Scheme for old-age and health benefits will be introduced on
self-registration/voluntary basis to allow workers in the formal and informal sector of economy to
benefit from it.

Model Schools for Workers' Children

54. Workers Welfare Model Schools (up to intermediate level) will be established in every district of
the country to provide education for children of Workers. These schools will be managed by
independent tripartite Provincial Board of Governors to protect them from political and bureaucratic
interference.

Merit Scholarship/Stipend Scheme

55. A Scholarship fund will be established to provide merit scholarships to workers' children seeking
higher education. A stipend scheme for placement of Workers' children in selected quality schools and
colleges will also be initiated.

Welfare of Mine Workers

56. The Mines Act, 1923 and other laws relating to welfare of mine workers will be revised to provide
more amenities to-them. Steps will be taken to provide on job training to these workers. Measures will
also be undertaken to provide more safety measures for these workers. EOBI, Social Security Schemes

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and WWF Schemes will be extended to the mining sector to provide much needed social, protection to
mine workers.

Institutional Improvement

57. The institution namely, Workers Welfare. Fund, EOBI and Social Security shall be re-organized
and re-structured to ensure minimum administrative expenditure and maximum output and benefits
for the employees. The management Boards of these institutions will be restructured to provide
appropriate representation from labour and employers to strengthen their tripartite character.

Labour Welfare Measure by Employers

58. The employers of large establishments will be persuaded to evolve their own programmes for the
welfare and social protection of their workers.

Inspection Services

59. The labour inspection services in the provinces shall be reorganized and streamlined.

Labour Market Information System

60. A labour market information system for providing updated labour force statistics and job market
information shall be developed with the technical assistance of ILO and UNDP funding.

Research and Training

61. Research and training facilities will be re-organized and better industry/private sector linkages
will be established to mainstream the contribution of research output.

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