The Securities and Exchange Commission of Pakistan (SECP) has drafted proposed measures for bringing improvement in effective implementation of Compulsory Group Life Insurance (CGLI) schemes. Sources told Business Recorder here on Monday that the SECP has submitted the proposal to the 5th Meeting of National Financial Inclusion Strategy (NFIS) Steering Committee.
According to the SECP, group insurance is already legally mandatory under Section 10(B) of the West Pakistan Industrial & Commercial Employment Standing Order Ordinance, 1968, but a significant part of the labor force remains uninsured. This is because their employers do not procure group insurance for their employees. As a result the families of such uninsured employees remain financially vulnerable to death or disability of their bread earner. After the devolution of powers under the 18th amendment to the Constitution of Pakistan, labor laws have been made a provincial subject.
Considering the erosion in purchasing power caused by inflation over the periods from 2001-2015, the sum covers specified for the workers in various statutes are not adequate. The minimum sum cover was last notified by the federal government in 2001 through the Labor Laws (Amendment) Ordinance, 2001, according to which, the amount stands at Rs 200,000. Accordingly, the minimum sum cover amount has been revised in 2013 by the governments of Punjab and Khyber Pakhtunkhwa to Rs 400,000 and Rs 300,000 respectively, but this too is not adequate, as aforesaid, the SECP said.
It is also noted that the applicability of the Standing Order Ordinance, 1968 triggers where the minimum number of employees in an industrial establishment is 50 and that of in a commercial establishment is 20. Further, the provision of group insurance is required for only permanent employees. The contractual and temporary workers have been excluded from the scope of the compulsory group life insurance. Furthermore, it has also been found out the provisions of Section 10-B (4) of the Standing Orders Ordinance, 1968 make the overall implementation of Section 10-B(1),(2) and (3) as ineffective by requiring the employer to pay the prescribed benefits against death and injury to the heir of the workman if insurance has not been procured by the employer.
The penalty for non-complying with the provisions of the Standing Orders Ordinance, 1968 is contained in Section 7 thereof; however, the same with passage of time has become very meager and does not essentially pose any financial threat on the employers non-complying with it. The amendments are being proposed in the West Pakistan Industrial & Commercial Employment Standing Order Ordinance, 1968 and the provincial Workers Compensation Act with following objectives.
To bring the applicability of compulsory group insurance equal to the general applicability of the Standing Order Ordinance, 1968 by changing the minimum number of employees working in industrial establishments from 50 to 20. To enhance, the scope of applicability of compulsory group insurance, by including contractual and temporary workers as well. This will help in discouraging the practice by private employers of not providing group insurance to contractual and temporary workers, the SECP said.
To introduce significant and dynamic penalizing provisions in their provincial Standing Order Ordinance, 1968 in order to enhance enforcement of compulsory group insurance and enhance the minimum sum cover and linking it with the minimum wages so that the value of the minimum sum covers is automatically increased with the revision in minimum wages. In respect of compulsory group life insurance, repeated reminders were sent to the Ministry of Finance for expediting the matter. A latest reminder has also been sent on September 15, 2017, the SECP added.
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