Understanding employee benefits under Pakistani law is crucial for both employers and employees to ensure fair workplace practices. In Pakistan, employment laws and labor protections are primarily governed by provincial regulations and fall into two main categories: Master and Servant Rule and Workman Laws. This article outlines the types of legal benefits employees are entitled to in Pakistan, based on their employment type and category.
Types of Employment in Pakistan
- Master and Servant Rule:
This rule applies to private-sector employees in managerial, advisory, or supervisory roles, who possess authority to “hire and fire” subordinate employees. Benefits and compensation for these employees are usually outlined within the employment contract and aren’t regulated under labor laws.
- Workman:
If an employee doesn’t meet the criteria for the Master and Servant Rule, they fall under the classification of a workman. Workmen are entitled to various legal benefits under Pakistan’s labor laws, regardless of the specifics of their employment agreement.
Key Employment and Labor Laws in Punjab
In Punjab, Pakistan, labor laws that protect workmen include:
The Industrial and Commercial Employment (Standing Orders) Ordinance, 1968
The Punjab Shops and Establishments Ordinance, 1969
Payment of Wages Act, 1936
Workmen’s Compensation Act, 1923
Punjab Industrial Relations Act, 2010
Mandatory Employee Benefits in Pakistan
Employees in Pakistan are legally entitled to a variety of benefits, which include work hour limits, overtime pay, bonuses, gratuity, holidays, social security, and old-age benefits. These entitlements help to create a secure and supportive workplace for workmen.
- Work Hours and Overtime
Daily and Weekly Limits: Workmen can work up to 9 hours a day and 48 hours a week.
Overtime: Any work beyond these limits must be compensated at **twice the standard hourly rate**. However, contract workers are generally exempt from overtime pay.
- Bonus Payments
Under the Standing Orders Ordinance, 1968, workmen who have worked continuously for at least three months are eligible for an annual bonus. The bonus is calculated as follows:
If company profits exceed the equivalent of one month’s wages for all employees, the bonus should be at least one month’s wages or up to 30% of profits.
If profits are below this threshold, the bonus should be no less than 15% of profits.
- Gratuity
Gratuity is mandatory for employees with over one year of service, as long as they are not enrolled in a provident fund that the employer contributes to equally. If applicable, gratuity is calculated as 30 days’ wages per year of service and is payable upon resignation or termination (except in cases of misconduct).
- Paid Leave and Holidays
Workmen are entitled to:
Weekly Rest Day: One day per week without pay deduction.
Annual Leave: 14 paid days annually.
Casual Leave: 10 days annually, typically granted in increments of 3 days.
Sick Leave: 8 days per year, with up to 16 days carried forward if not used.
Festival Holidays: 10 days per year.
- Social Security Contributions
Employers must contribute to the Punjab Employees’ Social Security Institution (PESSI), which offers benefits such as:
Sickness benefits, injury benefits, and disability pensions.
Maternity and iddat benefits.
Medical care for employees’ dependents.
Death grants and funeral grants in the case of employment injury-related fatalities.
Employers contribute 6% of an employee’s salary to PESSI each month to fund these benefits.
- Employees’ Old-Age Benefits Institution (EOBI) Contributions
Under the Employees’ Old-Age Benefits Act, 1976, employers contribute 5% of each employee’s salary toward EOBI, while employees contribute an additional 1%. EOBI provides a lifetime monthly pension (starting at PKR 10,000) for employees upon reaching retirement age (60 for men, 55 for women), which extends to their widows or children upon death.
The labor laws in Pakistan ensure that workmen receive essential benefits for a safe, fair, and stable working environment. These include:
- Fair work hours and overtime pay
- Annual bonuses based on company profits
- Gratuity for service over one year
- Paid leaves and public holidays
- Social security benefits through PESSI
- Retirement benefits through EOBI
Employers are encouraged to comply with these laws, and employees should be aware of their rights to ensure fair treatment in the workplace. While additional benefits may be offered at an employer’s discretion, these fundamental rights are non-negotiable under Pakistan’s labor laws.
If you’re an employer or employee seeking further information or advice, understanding the applicable laws in your province and consulting with a legal professional can help ensure compliance and safeguard your rights.