LABOUR POLICY

2002

MINISTRY OF LABOUR,
MANPOWER AND OVERSEAS PAKISTANIS
BLOCK-B, PAK. SECRETARIAT
ISLAMABAD
 Contents

Foreword 1

Background 8

Part-I: Principles, Aims and Objectives 11

Part-II: Action Plan 18

 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 cooperation 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

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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 bringing 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 while 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 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

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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 for
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 along with
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 employers of their reciprocal

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rights and obligations with all-round commitment to higher
productivity.

8. After an extensive tri-partite dialogue and consultation,

conducted over many months, a consensus has evolved regarding
the future shape and course of industrial relations 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 employees’ social security and social

insurance programs and improvement of labour welfare
institutions namely; Workers Welfare Fund, Employees
Old Age Benefit Institutions 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.

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 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 workers, employers 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 workers 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
Islamabad
23.9.2002

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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 cooperation between
employer and employee 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.

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 The Cabinet accorded approval to the Labour Policy 2002 in its
meeting held on 21.09.2002 under the Chairmanship of the Chief
Executive of Pakistan, General Pervez Musharraf.

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 BACKGROUND

A fairly elaborate labour market regulatory and institutional

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 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 introduction of legislation guaranteeing freedom of association and
the right to collective bargaining in accordance with ILO Conventions 87 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

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body namely; National Industrial Relations Commission 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 tilted 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 in employer-employee relationship. A 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.
?? 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.

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7. Another significant development that took place was the holding of
the 24th Pakistan Tripartite Labour Conference on July 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. The Government of Pakistan’s fundamental commitment to the

democratisation 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 a 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.

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 Labour Policy 2002

Part-I

PRINCIPLES, AIMS AND OBJECTIVES

Policy Foundations

10. Fundamental rights concerning labour as laid down in the

Constitution of the 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 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 cooperation. The
creation of WEBCOP (Workers and Employers Bilateral Council of

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 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 in

its 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
and consolidate these laws into following six basic laws relating to:
1 - Industrial Relations.
2 - Conditions of Employment.
3 – Payment of Wages.
4 - Human Resource Development.
5 - Occupational Safety and Health.
6 – Labour Welfare and Social Protection.

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 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.

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 and effective by
restructuring their respective management boards to ensure adequate
labour and employer representation and to strengthen their tripartite
character. Policy-making, coordination and monitoring of the functioning
of these institutions will be entrusted to these tripartite boards exclusively.

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 Elimination of Gender Discrimination

18. There is a 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 is 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 of contract labour in an establishment will be

protected through a written agreement between the employer and the
contractor, laying down responsibilities and liabilities of either or both of
them in this regard. A system of licensing for contractors will be

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 introduced so that contract workers are covered by labour laws and
qualify for labour welfare measures.

Rights of Workers in the Event of Privatisation

25. The Government shall take appropriate measures to protect

the rights of workers in the event of privatisation 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.

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 benefits to save both workers and employers from
inconvenience.

Section 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 courts.
Section 27-B in the Banking Companies Ordinance, 1962, prohibits a
non-employee to hold the office in the executive of a trade union. These
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, an

educated and skilled labour force has a critical role to play. There is an

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 urgent need to strengthen programmes of workers training and re-skilling
in new and multiple trades for facilitating entry in the labour market; both
nationally and internationally. The role of Skill Development Councils
(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 safety 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 market.
Labour Market Information System (LMIS) will provide, on a continuous
basis, information on employment/unemployment, job market
requirements and future projections regarding evolution of the job market.

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 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 internationally 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 constituted 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 strike or lockout” shall be substituted

with the “notice of conciliation”.

(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 Works Council.

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 (vi) Conviction on criminal offences of a heinous nature such as
theft, physical assault, murder, attempt to murder etc. shall be
made the basis 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 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.

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 (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 & Regulations which cover a variety of subjects relating to industrial
relations. Most of these laws are complex and overlapping in scope and
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 safety and health.
f) Law relating to labour welfare and social safety net.

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 in service.

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 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

shall be made applicable to every industrial and commercial establishment
employing 10 or more workers.

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.

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 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 laws 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 and 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
along with safeguarding the interests of the transporters.

Human Resource Development

50. A need-based vocational training and human resource

development programme shall be launched to provide vocational training

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 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.

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

Institutional Improvement

57. The institutions 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.

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 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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