‘Pakistan needs various types of minimum wages’

Interview with the office-bearers of Employers’ Federation of Pakistan

Once a lifeless organisation, the Employers’ Federation of Pakistan has become active of late.  It has increased its membership, and visibility, and it has resolved the issues of employers by negotiating with the government or by taking the government to court.  This noticeable change demanded a follow up with the EFP.

Therefore, a fortnight ago, BR Research sat with Zaki Ahmed Khan, EFP’s Vice President, and Fasihul Karim Siddiqi, the body’s Secretary General to discuss EFP’s turn around, its plans to improve labour compliance, boost corporate productivity, liaison with business schools and universities, and EFP’s stance on some of the key aspects of labour economics including devolution of EOBI, social security, the ratification of ILO conventions and minimum wages.   

BR Research: We met the EFP in 2016? Since then you have published your first annual report ever. What else has changed in terms of organisational governance and its goals?

Zaki Ahmed Khan (ZAK): The biggest change has been a visionary one. There is no comparison between the top leadership now, and of the previous years. The EFP has been strengthened by the leadership of its newly elected President Majyd Aziz who had earlier been on the EFP Board for 14 years and is now leading the organisation to become the most effective and relevant employers’ body in Pakistan.

Previously, the EFP used to interact with HR heads, now we interact with CEOs, thanks to that change in our leadership. It is a big difference, because the CEOs of companies have more power to get the job done.

Secondly, majority of our governing body now has big companies like Sitara Chemical, English Biscuit and so forth. Earlier the number of technocrats was higher; now the number of employers is greater. Furthermore, we held two major events like Employer of the Year and an annual dinner, where major attendees were the CEOs.

BRR: What does the annual dinner achieve? Is it just a gala for socialising?

ZAK: It put the EFP back into the spotlight. In the history of EFP, this was the first event to be attended by a majority of CEOs, which helped us get the right weight behind the body. CEOs of big companies have never attended any of our events before. Previously, being an employer body, we would chase firms to become members. Today, firms are reaching out to us to get memberships.

The EFP visibility has not only improved within the country but also in the region which is manifested by the fact that for the first time in its history, the six-member countries of South Asian Forum of Employers (SAFE) are going to meet in Karachi from 18th to 20th February 2018.

The inaugural session of this meeting will be held in Sindh Governor House and Governor Sindh will inaugurate the meeting. EFP recognition has also increased globally and the EFP president has been elected as the substitute member in the ILO Governing Body for three years in the very first international labour conference.

BRR: In July 2016, the EFP said that by 2020 it wanted to double its membership and increase presence in other cities. What’s the update on that front?

Fasihul Karim Siddiqi (FKS): We have already established our offices in Peshawar, Sialkot and Islamabad. The one in Lahore will be launched next month. Since July 2017, we have achieved 70 new memberships. This is the first such growth in EFP’s history.  And these are the companies that we did not approach ourselves. In the last two years, we have seen the highest growth in memberships.

We achieved this through two strategies pertaining to membership retention and growth. We started with 559 members in September 2015. Today that number stands at 684; it’s an ongoing process. The same can be said for trade bodies as members, where we started with 13 and we stand today at 25.

Eight important trade bodies of Karachi have become our members only last year, which includes Federal B. Area, Kati, New Karachi, Bin Qasim, Landhi, Site, Korangi industrial zones. It is not a small endeavour to attract people who never even looked at us before. Previously our recovery of annual membership fees used to be 50 percent, whereas for the first time in ten years, we achieved a recovery of 85 percent.

BRR: What has been achieved in terms of your advocacy and lobbying for the interest of employers?

ZAK: We have primarily worked on three things. We have improved our visibility; we have improved member’s involvement; and we have improved our value to our members in terms of why they should pay us. About 80 percent of our members are not members because we went to them, but they came to us because of the involvement that we created for them.

How did we create involvement? The first step was lobbying. We are lobbying for compliance with labour law, social obligations, and governmental obligations. In the process, we found that our members have a lot of bottlenecks. Those bottlenecks were not helped. For example, majority of the employers want to contribute social security, old age pensions, and minimum wage. But they are being harassed by the social security people and nobody knew why. We found out that there were a lot of unresolved legal issues. Therefore, we initially tried to solve them with the government, and later approached higher courts for the redressal of legal issues.

BRR: Speaking of which, what’s the latest on the petition on Sindh’s increase in EOBI collections?

FKS:  The federal EOBI issued a circular last year demanding the tripling of EOBI’s contribution with backdated affect. That circular was meant only for federal capital areas. But EOBI in all provinces also started demanding it.

To solve this, for the first time in the history, all the five High Courts were knocked by the EFP with about 350 petitioners approaching that this law has to be corrected. As a result, Lahore High Court ultimately crushed the law. The Sindh High Court and all the other four High Courts issued a stay order. As a result of EFP’s efforts, our members gained confidence because now the employers knew that we can fight for them.

BRR: Wasn’t there a similar incident on social security?

FKS: Yes. The upper age limit for Social Security Contribution has been increased from Rs10,000 to Rs22,000, and nobody bothered to find out what the rule book said. Again, we galvanized the members and went to court with 80 companies joining our petition. We argued that the government went ahead and issued a notification without forming the governing body for it. Soon, the government began negotiating with the EFP. They asked us to withdraw the case and they’ll withdraw the notification. We insisted for withdrawal of this notification first. It took three months for the government to decide and finally the government withdrew its notification.

BRR: What activities are you undertaking to improve compliance? Do you conduct periodic surveys to assess the level of compliance ratio in your member companies?

FKS: The current level of labour laws compliance is very low. There are many reasons behind it, one of which is harassment by labour department whose officials demand bribes for looking the other way. To fix this, we have engaged the labour department at the one end and at the other, we have started offering a service of labour law compliance audit to our members.

In other words, the EFP is asking our members to get their auditing done from us. We conduct their audit professionally for two days and we tell them the gaps. We also help them improve the gaps and the level of compliance. So far, we have done several audits. Our labour law audit is more stringent than that done by the labour department.

As for the surveys, it needs R&D, which we have just started. We have hired a group of young graduates who are being trained in conducting surveys and research. In addition, we are offering a certification course in health and environment. We have also established an academic linkage in our new service of compliance and auditing. We have signed MoUs with 6 universities so far, whereby their faculties and students will conduct joint research on our recommendations.

BRR: Is your certification valid as per law?

ZAK: We are not interested in certification; we are interested that most of our members begin to comply. Once they start to comply, the compliance will speak for itself. That’s when our services will begin to have a value.

BRR: What other services are you offering aside from compliance audits?

FKS: We offer three types of services. They include audit services, training services and legal services. We offer training in areas that have not been touched before, where we have started inviting international speakers and trainers. Previously, when we used to float training programs, only four to five people used to respond. Now, 20 to 25 people respond to us.

We are also expanding our legal service in addition to consultancy on industrial relations, human recourses and management consultancy. We are going to start clinical service in these areas for our members. The next time you visit, you will see that EFP has consultants’ clinics in management, healthcare, industrial relations, just as you have consultant clinics in hospitals.

We haven’t started the clinics as yet, but our members have already begun to take deep interest. The idea is that our members can bring their issues to the specialists on our panel that will be holding consultant clinics against a certain fee. They will come to us, discuss their issues, collect their prescription, and leave. Follow-up services will also be available.

BRR: How will the EFP-academia linkage take off in the absence of people with relevant qualifications?

FKS: We are in the process of starting a post-graduate diploma course in industrial relations and employment laws. To date, there isn’t a diploma on this subject anywhere in the country. We are currently negotiating with the Institute of Business Administration (IBA), which has agreed to work with us to offer a one-year postgraduate diploma in employment laws and industrial relations.

We have also collaborated with Punjab University in initiating an MPhil program, in essentials of labour safety. In a few years, we will become a factory of producing Occupation Safety Health Environment (OSHE) managers and industrial relation managers. That is going to be a very big contribution of EFP in producing people with relevant professional qualifications to serve the industry.

BRR: What’s the latest update on the Joint Action Plan following the Baldia Town incident?

ZAK: Finally, the International Labour Organisation (ILO) has been successful in making its funding available to the tune of $5.1 million, while the government has made a monitoring board. They have included social security institution as the executing body and they have agreed to give pensions to 200 plus families. The funds will be distributed among the families of the deceased. The chart has been made and the agreement has also been signed. Now it is in execution phase.

Moreover, the government took that event very seriously. Right after that event, a conference took place where a working paper was designed. A consensus was developed on that working paper and then it was legislated. Accordingly, health and safety act has been promulgated in Sindh in November 2017.

BRR: What can the EFP do to ensure that it is implemented as well?

ZAK: Implementation failure isn’t just confined to this law. It’s across all labour laws. We can help the government implement those laws provided they look after the aspect of “lifafa” culture.

BRR: What about the much-delayed tripartite conference?

ZAK: The EFP took an initiative one year back. We held the first National IR and Provincial Tripartite Labour Conference. We presented a draft labour policy to all four provincial labour secretaries who were there at the conference. Then we followed up with the provincial government of Sindh after the workers signed the labour policy draft which has happened for the first time in history.

The Sindh Government held its first tripartite labour conference in December 2017. Six months before the conference, six tripartite subcommittees were formed in areas of labour policy, labour laws, welfare laws, health and safety, labour inspection and special issues. The subcommittees finalize their recommendations which were approved in the Sindh tripartite labour conference. The Sindh Government has formed a standing tripartite labour subcommittee for implementing the decisions taken in the tripartite conference. The labour policy in Sindh will hopefully be finalised before the election. In the next step, we will be approaching other provincial governments as well.

BRR: Do you think the EOBI should be devolved?

FKS: That’s a double ended question. Pakistan is the third country in the world where labour has been devolved. America is one, Australia is the second, and Pakistan is the third. What’s the purpose of devolving labour? America has 50 states; each state should be in a positive competition with each other in promoting investment. This is the real purpose.

As employers, we feel it is a positive step. It should be encouraged. However, our ground realities are such that it seems devolution will not work. Our workers are working here, their parents are in Peshawar. Their family is somewhere else. Then they keep moving. Today they’re working in Karachi, tomorrow they’ll work in Lahore, which begs the question, how will they get the benefits such as pension and social security.

EFP’s view is that devolution should be supported provided there is a structure which is made available in a way that it can function. If central coordination is strong, then there is no issue. If employees in Sindh move to Punjab tomorrow, the Punjab government should provide them the same benefits – the benefits and records thereof could be transferred there. Till such time there is a central structure and a coordination mechanism, people will be at a loss.

BRR: Pakistan has ratified many ILO conventions, but many relevant laws and institutional arrangements are still not in conformity with those conventions. Where does the EFP stand on this?

FKS: Our main position is that we should not be emotional in ratifying conventions. Ratifying conventions does not mean anything if you cannot implement them. Brazil grew after Pakistan and today it is a world power. How many ILO Conventions did they ratify? How many did China? Very few. India also ratified just a few core labour standards. Pakistan has ratified all the 8 core labour standards, on child labour. My point is, we have jumped the gun on ratifications.

Pakistan should have followed the global examples by first preparing their country for it by making laws, implementing them, and then ratifying the conventions so that there are no hurdles. Instead, we ratified the conventions, and now there are so many complaints at the ILO.

BRR: But with weak growth in exports, Pakistan had to go to the EU to get GSP+ and for that we needed the ratifications.

ZAK: We need the GSP+ that is the ground reality. But our view is that Pakistan should have prepared itself before it went ahead with the ratifications. But what’s done is done. Now we have to be compliant. To help achieve that, the EFP is currently in social dialogue with leather, textile, and garment sectors. They need to prepare models for maximum implementations. We have worked for social dialogue in which we are trying to develop 8-9 companies throughout the country in different sectors, which will be model companies in the implementation of laws and which will serve as an example for others.

The new ratifications are increasing our standard, and we want to support those. But still, our view is that till such a time we are not ready, we should not ratify. We can follow the ILO recommendations, and implement the recommendations. We need to reach such a stage where our laws and factories complement them and then we should decide to ratify. This is the same thing the US did. It ratified only eight conventions. They took a very easy ground by saying that all their states were independent in ratifying and till all 50 states ratify, the US could not ratify the conventions either.

BRR: Does the EFP support the view that minimum wage increases should be linked to the cost of living index?

 FKS: The EFP’s contention is that minimum wage increase should not only be linked with cost of living index but should also be based on defined criteria such as demand and supply in the labour market, company’s ability to pay etc. Moreover, minimum wage is conceptually the joining wage assuming various members of household are working and therefore low minimum wage should not be a problem. In this case minimum wage of an unskilled worker who is at the most initial stage of joining the employment in the market cannot be taken as the living wage of the family.

BRR: But many families in Pakistan have only one member of household as the bread earner which makes minimum wage as the living wage.

FKS: A lot of data deficits exist in our research. We have no data available in our census about the number of bread earners in a household that can clarify and strengthen our contentions.

Even an unskilled workers wage which starts from Rs15,000 grows in amount by the time the unskilled worker gets married and has a family. Therefore, it will still not be right assumption that even if there is only one member of household as a bread earner of the family such a member has to meet his family expenses from the minimum wage.

It should also be noted that the minimum wage for unskilled workers in Pakistan is one of the highest in the region as compared to India, Bangladesh, Sri Lanka, Nepal and even China.

Minimum wage for unskilled worker also has to be distinguished from minimum wage for different categories of worker in an industry. For example, the minimum wage board in Sindh not only recommends minimum wage for unskilled workers upon a receiving a reference from a Provincial Government but is also engaged in recommending minimum wage for various categories of workers such as semi-skilled, skilled, highly-skilled and intellectual workers including office staff and supervisors. These minimum wages are much above the minimum wage for unskilled worker and are based on surveys of prevailing wages in industries. This minimum wage is comparable with living wage of a household and it ranges from somewhere between Rs20,000-70,000 per month.

BRR: The Pakistan Business Council says there should be different minimum wages for different cities and for peri-urban and rural areas. What is your view on this?

FKS: When the minimum wage law was introduced in the country, different wage rates were recommended for different cities based on ground realities. That was a correct approach. The EFP feels that generalizing minimum wage for the country or the provinces is unfair since the cost of living widely differs in rural and urban areas and this should be given due consideration while recommending minimum wage.

BRR: Would you support the state making social security a universal right?

FKS: It is the duty of the state to provide social protection to its citizens, including workers, as a universal right and the EFP fully supports this contention. However, the irony is that this is one of the most neglected parts.

The social security benefits available to workers are fully funded by the employers and the government makes no contribution to this fund. The same is the case with EOBI where employers contribute 5 percent of the payroll and employees contribute 1 percent of the wages whereas the government makes no contribution. Moreover, only industrial workers are covered through social security and EOBI laws, whereas large number of informal workers, home based workers and domestic workers are totally deprived of any social protection.

BRR:  But employers don’t have a clean chit either. For instance, in the famous Baldia factory incident; only 300 workers were registered with the EOBI, whereas about 1,700 workers were employed there. Similarly, social security institution claims that only 33% of the registered employers pay social security contribution.

FKS: The basic reason for low participation of employers in social security and EOBI is the ‘lifafa’ culture whereby the SESSI/EOBI officials themselves are party to instigating employers for not paying contribution in respect of all their workers and unscrupulous employers are tempted by such unfair advices.

It is EFP’s assertion that if employers/ establishments are allowed to pay contribution on self-assessment basis without intervention by the SESSE/EOBI inspectors, the contribution level can be substantially improved. Moreover, EFP has already launched its campaign for “Say no to corruption and be compliant with labour laws”.

The EFP stands for progressive forward looking and compliant employers and will discourage non-compliant employers. However, the EFP would support a reformative rather than a policing approach in improving employer compliance.