Minimum wage – 20 May 2023
AT present, there are three laws providing for the regulation of the wages of workers employed in certain industries. The oldest one is the Payment of Wages Act, 1936, which defines the components of workers` wages and payments made or expenses incurred on them which are not considered wages. Besides, the Act lists 11 types of deductions in a worker`s wages.
The minimum wage rate of hundreds of jobs is fixed under the Minimum Wages Ordinance, 1961. The minimum rate for unskilled workers employed in commercial and industrial establishments is fixed under the Minimum Wages for Unskilled Workers Ordinance, 1969.
The three laws have been adopted by the provinces following the devolution of labour laws after the 18th Amendment in 2010.
The minimum wage for unskilled workers is the most contentious because it is the base line for wages in other jobs and also because it determines the national wage level of workers in industrial and commercial enterprises. Therefore, the 1969 ordinance gains significance as it deals with minimum wages for only unskilled workers.
The minimum wage of Rs140 per month fixed in 1969 remained unchanged until 1993, when it was retroactively raised to Rs1500 effective from July 1992. This was the only increase in the minimum wage of unskilled workers in 31 years, till 2000. It also implies that the increase in living costs during this period was not significant.
Besides, labour unions and federations were active then, but did not compel governments to make such increments.
Nevertheless, in these 31 years, raises known as COLA in the salaries of low-paid employees, would be made from time to time through the Employees` Cost of Living (Relief) Act, 1973, and the Employees` Special Allowance Acts of the provinces.
The last COLA, of Rs100 per month, was made effective from December 2000. The law of special allowances became redundant in the early 1990s, after allowing nominal pay rise twice.
Progressive employers following the labour laws in letter and spirit allowed Collective Bargaining Agent (CBA) unions in their enterprises and reached anagreement with them periodically. Such agreements would be instrumental in allowing increases in salaries and benefits to unionised staff.
From 2001 to 2022, minimum wages for unskilled workers have been increased 14 times from 14pc to 67pc. The last increase was from Rs19,000 to Rs25,000 effective from July 2022. Over the last few years, the meteoric rise in the cost of living has been a key factor in determining the new rate.The revisions in the provinces` minimum wage are proposed by the respective provincial governments in their annual budgets.
These are then reviewed by the minimum wage boards of the provinces, which have been constituted under the law and also have representation from the employers. It is unfortunate that the paying capacity of employers is being eroded due to the enormous increase in their fixed costs of utilities and security. If entrepreneurs received some government relief on these counts, they would be in a far more comfortable position to disburse even living wages to their workers.
In view of unprecedented inflation in the country, labour unions and civil society groups, among others, which took out rallies in Hyderabad on Labour Day, demanded that the minimum wage be fixed at Rs50,000 per month and pension sums be doubled.
These demands are not unrealistic; but at the same time, amenities available to employers previously should also be restored.
Another factor responsible for the rapidand unnecessary increase in employers` fixed costs are the massive amounts of monthly contributions payable by them on behalf of their employees to the Employees` Old-age Benefits Institution (EOBI) and the Social Security Institutions.The benefits currently disbursed among eligible employees by these institutions are not commensurate with the huge contributions received by them from the employers.
Under the ordinances, the present rate of contribution is 6pc of the prevalent minimum wage, which is Rs25,000 per month. If the minimum wage of unskilled workers is increased by the government to, say, Rs35,000 per month in the next fiscal budget, it will constitute a 40pc increase in employers` contribution. On the other hand, EOBI has not increased the amount of pension from Rs8,500 per month since January 2020. Dispensaries and hospitals run by the Social Security Institution lack proper facilities and capable paramedical staff; they can`t cater to seriously ill patients, who are then shifted to private hospitals.
In view of all this, the governments should immediately delink the amount of contribution from the minimum wage and revive the previous system of making contribution payments against reasonable fixed amounts. The wúter is a consultant in human resources at the Aga Khan University Hospital, Karachi.