'Government keeps increasing minimum wage every year without following procedures,' says EFP chief

Earlier this month, BR Research met Khawaja Muhammad Nauman, the president of Employers' Federation of Pakistan who has been in the office since 2012. In this interview, Nauman talks about issues in the fixing of minimum wages, and lacunas in the laws relating to labour market regulations in Pakistan.

<B>BR Research: Tell us a little about Employers' Federation of Pakistan and why is it the only body that can represent the interests of employers in the country?</B>

<B>Khawaja Muhammad Nauman:</B> The history of Employers' Federation Pakistan (EFP) goes back to pre-partition days. As early as 1931, the Government of India had informed the Federation of Indian Chambers of Commerce and Industry (FICCI) that after the Treaty of Versailles, the FICCI could not be treated as an organisation of industrial employers.

In light of this, the All Indian Organization of Industrial Employers (AlOE) was formed that year. Meanwhile, the Bombay Chamber - in which Sindh was included - and the Bengal Chamber took initiative and decided to form the Employers' Federation of India (EFI) in 1933. Since then till independence, the Northern and Eastern part of the subcontinent was being looked after by AlOE, whereas the Southern and Western part was controlled by EFI.

After the partition, the AlOE and EFI continued to provide services to its members in India, but since Pakistani economy was mainly agrarian in the early years, no such domestic organisation was formed until the year 1950. Today, the EFP is registered with the SECP and has two main objectives: promote and protect the interest of employers, and create harmony and good relations between employers and workers.

<B>BRR: But how representative is the EFP? For instance, if your website is any guide, you only have two members firms from the FMCG sector, and only one from the consumer sector.</B>

<B>KMN:</B> We are the most representative employers' body in Pakistan. Our membership may not be very big but we have most of the chambers and trade and business associations as our members, which gives us a wide representation across all kinds of business sectors, all across the country. Moreover, we are also in the process of expanding our membership and improving the services we offer to our members. By 2020, we hope to double the membership of EFP, with regional offices established at all provincial capitals.

<B>BRR: What benefits or services does EFP offer to its members?</B>

<B>KMN:</B> There are many advantages to becoming an EFP member. Firstly we are the voice of employers for looking after their interest both nationally and internationally with especial attention in the areas of industrial relations (IR), human resources (HR), occupational safety and health (OS & H), social dialogue and skills development. Secondly, we provide guidance in matters concerning IR, HR, OS & H and Labour Laws etc. Additionally, we extend training / HR development opportunities in various management subjects both locally and overseas. . The local training is subsidised for members and it is the most economical in the market. Then there are seminars, conferences and workshops held for members' benefit.

<B>BRR: What are some of the biggest challenges that EFP is set out to resolve?</B>

<B>KMN:</B> There are many. For one, the government doesn't listen to our recommendations, even though it is obligated to hold tripartite consultations under the ILO Convention. Second, the government keeps increasing minimum wage each year, without following the procedures. Third, following the devolution, there are major co-ordination problems between the centre and provinces, as well as in between provinces.

Fourth, there is a serious implementation problem. It so happens that only the big formal players are able to implement the regulations; the rest, especially in the very huge informal sector, do no implement it and therefore it leaves the formal players at a disadvantage. Fifth, there is no consensus of definitions; even the word 'worker' is defined differently in different laws. One law has in fact created such a lacuna that it has even defined white-collar managers as workers, which will create serious of problems for companies/ organisations.

<B>BRR: But tripartite consultation doesn't mean that the government must accept everything that the stakeholders say. Consultation doesn't imply a sense of compulsion, or does it?</B>

<B>KMN:</B> You are right, it doesn't. But if the government does totally opposite of what the stakeholders are saying without giving logical reasons or explanation for it, then it raises questions whether the government is even genuinely interested or is merely fulfilling the formality.

<B>BRR: What are your concerns about minimum wage?</B>

<B>KMN:</B> According to law, changes to minimum wage have to be done in consultation with the stakeholders including the EFP; there are a host of procedures to be followed by the minimum wage board. However, instead of discussing with us first and then announcing, the government announces it first and then holds a discussion. Not only does it affect businesses, but it also affects workers too, since minimum wage is effectively implemented in September/October i.e. three to four months after the announcement. Moreover, minimum wage is not pegged to productivity, which should be the case to boost productivity.

<B>BRR: It seems the minimum wage is set arbitrarily. Has the EFP pushed for something concrete - like pegging minimum wage to a cost of living index, or living wage index?</B>

<B>KMN:</B> We haven't. The question is how reliable are these indices. We all know how PBS's inflation and other numbers are controversial. Who is to guarantee that these indices will not be miscalculated and misused for political purpose at the cost of employers' interests?

<B>BRR: What impact EFP has on broader economic policymaking?</B>

<B>KMN:</B> Our first exercise of this kind was done in 2013 in the form of National Business Agenda that didn't only talk about the problems but also gave solutions to Pakistan's key policy problems. Copies of that document were forwarded to all concerned, including President and Prime Minister of Pakistan, as well as all political parties represented in the assemblies, and it was well received by the stakeholders. Our information and research unit is currently in the second round of preparing the same with problems and solutions; the National Business Agenda 2018 is due to be launched early next month.

<B>BRR: What is the implementation status of ILO Conventions in Pakistan?</B>

<B>KMN:</B> As the labour is a provincial subject, we think the federal government should work towards implementation of ILO conventions and build a framework for effective implementation of the same across provinces.

<B>BRR: You earlier alluded to some legal lacunas in labour laws. Can you give an example?</B>

<B>KMN:</B> Well in Sindh, for instance, there is an old law by the name of "Disabled Persons Employment & Rehabilitation Ordinance 1981," which is basically the federal law. This is supposed to be replaced by the new title "Sindh Differently Abled Persons (Employment, Rehabilitation & Welfare) Act, 2014." However, to date, the old law ie "Disabled Persons Employment & Rehabilitation Ordinance 1981" has not been repealed, which creates a typical situation that two laws now exist on the same subject. The only thing that the provincial government has to do is insert a clause that renders the federal law repealed, but it hasn't done that yet.

<B>BRR: Lately, certain issues were raised against the Sindh Shops and Commercial Establishment Act, 2015. Can you shed some light on that?</B>

<B>KMN:</B> The most pressing concern in it pertains to its section 2-FIII, under which the clerical department of a factory, or of any commercial or industrial undertaking, has been included in the definition of commercial establishment; because the clerical department of a factory was previously excluded from the definition of the factory. However, now that under the New Sindh Factories Act 2015, the definition of factory also includes clerical department, this sub section must be removed as otherwise clerical department of a factory will be covered both under the latest Factories Act as well as the Shops and Commercial Establishment Act, which is illogical and unfair.

<B>BRR: Following the devolution, the EOBI was also supposed to be developed. However, we are told that at the one end its funds haven't been devolved as yet, whereas provinces lack institutional capacity to take charge. What is your view on this?</B>

<B>KMN:</B> Our view is that the EOBI should remain with the Federal Government. This is because first of all, EOBI itself has sustainability issues; there are reports that by 2022 it will be seriously short of funds to pay its obligations. More importantly, however, in absence of smooth inter-provincial co-ordination, it is difficult for both workers and employers to collect or pay welfare payments when workers migrate from one province to another. This is why KP assembly has already passed a resolution that EOBI is transferred back to the centre, while the Balochistan assembly is also expected to pass a similar resolution to that effect. Having EOBI at the centre is good economics since it is more efficient to have it at the centre.