Home > Projects/Reports > Comparison of Compensation Laws Between Developing and Developed Countries

Comparison of Compensation Laws Between Developing and Developed Countries


Comparison of compensation laws between developing and developed countries


Comparison of Compensation Laws Between Pakistan and the United KingdomComparison of Compensation Laws Between Pakistan and United Kingdom

Pakistan Compensation Law

Minimum wage in Pakistan (developing country)

Minimum wage in Pakistan is based on the level of skill of the worker as defined by the labor department and is set by the provincial government. This varies from Rs. 9000 per month (approximately $92) for an unskilled worker to Rs. 9178-9329 ($93.50-95) for a semi-skilled and Rs. 10,081 (($103) for a skilled worker, employed in the apparel industry in Punjab from 1st July 2012, a 28 per cent increase over 2010’s minimum wage.  In Sindh, minimum wage in this industry starts at Rs. 8,000 ($82). Regionally, this is considered high as compared to Bangladesh’s minimum wage, varying between Dhaka 3000 ($38) to 3861 ($49) per month, depending on skill levels. Similarly, in Sri Lanka, minimum industrial wage is ranged between 6500 LKR ($51) to 9500 LKR ($74.50).

Working Hours and Holidays

If you are working 8 hours/day, you are eligible for one-day holiday in a week. It can be either day in a week and can also be the day when your establishment is closed. But you need to remember that if you are made to work on your holiday; you can’t be made to work consecutively for 10 days without being given a compensatory holiday for full one day. Your weekly holidays are paid and your employer can’t deduct money for these holidays.

Festival holidays are in a year
The provincial government announces festival holidays, and these are usually 14 in number. These are provided on full pay. However, if a holiday falls on Sunday, there is no substitution for it.

Annual Leave and Holidays:

Annual leave are the paid leaves (also called paid time off) granted to the employees in which an employee is free to do whatever he/she wants to do for some days.

Paid Vacation / Annual Leave

An employee is entitled to 14 calendar days paid annual leave, after completion of 12 months of continuous service. (section 49-B of Factories Act). This law does not indicate whether paid annual leave increases with longer service/seniority. A worker is paid his daily wages while he is on annual leave. Factory workers are paid half of the pay due for annual leave before start of the leave. The annual leave has to be consecutive and may not be split however if a worker fails to avail whole leave during the 12 months, it is added to the next year. However, not more than 14 days of leave can be carried forward.

 Pay on Public Holidays

Workers are entitled to paid Festival (public and religious) holidays.  Festival holidays are announced by Ministry of Interior, Islamabad and Provincial Government at the start of calendar year (usually 14 in number) (section 49-I of Factories Act)

Weekly Rest Days

Workers are entitled to 1 day of rest per week (24 consecutive hours). The weekly rest day is usually Sunday. If a worker has to work on holiday; he can’t be made to work consecutively for 10 days without being given a compensatory holiday for full one day. (section 35 of Factories Act)

Regulations on Annual Leave and Holidays

  • Factories Act, 1934

What factors lead to ineligibility for this annual paid leave?

An employee is not eligible for annual leave in the following cases:

  • Sickness, accident or authorized leave exceeding 90 days
  • Unauthorized leave (even for one day)
  • An illegal strike (even for one day)
  • Leaving employment before making an application for leave
  • Intermittent periods of involuntary unemployment exceeding 30 days in total

Admissible number of leave days under different labor laws

As explained above, a fourteen days’ consecutive paid annual leave is allowed under Factories Act and Shops and Establishments Ordinance.

If you are a mine worker, your annual leave is authorized under the Mines Act. This Act provides for one day of leave for every seventeen days of work below ground during previous 12 months and one day of leave for every 20 days of work above ground during the previous 12 months. In any case, a mine worker has more than fourteen days of annual leave with full wages. This leave can also be accumulated however the Act restricts this accumulation to only 20 days. You also don’t need to take this leave as a whole and you can take it in parts, as provided under this Act.

This Newspaper Employees Act does not specifically fix the days of leave however it provides that the earned leave should not be less than 1/11th of time spent on duty. You may also keep in mind that weekly holidays, public holidays and authorized leave count as duty.

If you are road transport worker, you are also eligible for at least 14 days leave with full wages if you have completed one year of continuous service. Under this Act, you are also eligible for at least 7 days paid leave on completion of six months continuous service.

Laws Earned Annual Leave
Factories Act, 1934 14 consecutive days’ leave
Shops and Establishments Ordinance, 1965 14 consecutive days’ leave
Mines Act, 1923
  • One day of leave for every seventeen days of work below ground
  • One day of leave for every 20 days of work above ground
Newspaper Employees Act, 1973 At least 1/11th of time spent on duty
Road Transport Workers Ordinance, 1961 At least 14 days leave with full pay

 Occupational Safety and Health Laws in Pakistan

There is no independent legislation on occupational safety and health issues in Pakistan. The main law, which governs these issues, is the Chapter 3 of Factories Act, 1934. All the provinces, under this act, have devised Factories Rules. The Hazardous Occupations Rules, 1963 under the authority of Factories Act is another relevant legislation. These rules not only specify some hazardous occupations but also authorize the Chief Inspector of Factories to declare any other process as hazardous.

The other related laws are:

• Dock Laborers Act, 1934
• Mines Act, 1923
• Workmen Compensation Act, 1923
• Provincial Employees Social Security Ordinance, 1965
• West Pakistan Shops and Establishments Ordinance, 1969
• Boilers and Pressure Vessels Ordinance,

Government ensures that the above-mentioned provisions are followed at the workplaces
All the above laws require the appropriate government (Federal or Provincial) to appoint qualified individuals as inspectors. It is the duty of inspectors to enforce these laws. The usual powers of inspectors include the right to enter and inspect any workplace, taking evidence from persons for carrying out their duties. A person can’t be appointed as inspector or continue to hold the office of inspector if he or she becomes directly or indirectly interested in the workplace (it is factory under the Factories Act, a dock or a ship under Dock Laborers Act and a mine under the Mines Act.

Training to the workers regarding workplace health and safety issues:
Various government agencies like National Institute of Labor Administration and Training, Directorate of Workers Education provide training to workers on these issues. Directorate of Dock Workers Safety (DDWS) and Central Inspectorate of Mines provide training to dock workers and mine workers respectively. The Centre for Improvement of Working Conditions and Environment (CIWCE) is a pioneering institution in Pakistan (working under the Directorate of Labor Welfare, Punjab) which provides training, information and research facilities for promotion of safety, health and better work environment in the industries and businesses. You can also find training materials, safety posters and different safety signs from this Center.

Special provisions relating to working mothers in the law

According to the article 37(e) of the Constitution, State shall make provisions for securing just and humane condition of work for every worker. Both the Labor Protection Policy 2006 and Labor Policy 2010 talk about providing day care facilities for the children of working mothers. Daycare facilities have also been ensured for children of working mothers under the Factories Act 1934. According to the section 33-Q of the said Act, the Provincial government can make rules requiring a factory wherein more than 50 women are employed, a suitable room shall be reserved for children, under the age of six years, belonging to these women. Under the Punjab Factories Rules, 1978, these rooms are restricted only to children, their attendants and mothers of children. Every establishment is also required to hire a trained nurse and a female servant for looking after the children. Women workers can also use this room for breast-feeding their children during breaks.

Medical care of children/dependents

The Provincial Employees Social Security Ordinance 1965 has clear provisions on this. If you are a secured person (meaning that contribution for you are or were payable by your employer to the Social Security Institution), you and your dependents are entitled to the medical care (section 38). In case of an illness, you and your dependents can either be treated at the Social Security Hospital or any other hospital with which your employer has agreement for treatment of its employees.

Education of Children

First of all, under the article 25-A of constitution (added through 18th constitutional amendment in 2010), it is now the state responsibility to provide your children free and compulsory education from age 5 to 16 years.

There is a special law with provisions for workers’ children education and it assigns levies on employers to raise funds for worker’s children education. The funds thus collected are used to provide educational facilities to workers’ children and improvement of schools located in or attached to the industrial undertakings (Punjab Education Cess Utilization Rules, 1978). The Workers’ Children (Education) Ordinance 1972 is applicable to an establishment, which at any time during the year had employed ten or more employees. The education cess/tax levied on such organizations is one hundred rupees per annum per worker. These funds are collected and administered by the Social Security Institution.

Employees Old-Age Benefits Institution (EOBI)

Employees Old-Age Benefits Institution (EOBI) fund, which comes under the federal government’s jurisdiction, and Social Security, under provincial authority, are two employee benefits that are legally mandatory here, as they are the world over. Monthly contribution for the former is six per cent of minimum wage, five from the mill and one from the employee, who starts receiving benefits with minimum 10 years of employment and after attaining 60 years of age. Minimum pension amount is Rs. 3500. For the latter, it is six per cent paid entirely by the mill. When the mill registers its employee, he/she is issued a Social Security card, entitling him/her plus family to free of cost medical care at designated Social Security hospitals, and for more serious cases government-run general hospitals.

Application and implementing problems of laws in developing countries

Transparent audits and inspections to ensure that mills comply with labor laws are not carried out by the relevant government departments to the best of their ability. Either there are no audits at all or the government officer affects a cursory inspection and may be paid off to hand in a satisfactory report. In these cases, Matrix plays an instrumental role in making mills more compliant. Additionally, when there is a discrepancy between labor laws of the land versus globally accepted laws with which brands comply, Matrix enforces the tighter standard. Mills working with Matrix adhere not only to the land’s labor laws, but hold themselves to an even higher standard as brands demand and enforce implementation of laws. If a brand gets associated with a below standard mill, then its market share gets detrimentally affected.

Problems arise because of a lack of worker awareness of the law and their rights. Due to limited or no education, even if workers have heard of compensation awards, they don’t know the procedure involved unless the mill helps them. On the flip side, even some mill owners don’t always know that it is their responsibility to record and report the accident, he said. Many times, they settle with the worker out of court, the worker then files the case at the compensation department again and gets awarded the same compensation, thereby receiving double the award at the cost of the mill. Then, there is a paucity of resources provided to this department by the provincial government. (There was not a single computer to be seen in the entire office building).

“Some labor department officers don’t even have knowledge of the law as they have been promoted up or appointed as a favor,” said general manager administrator and human resources, Sapphire knits division, Lahore, Falak Sher Chaudhary, who had come to the compensation office to report an injury case at his mill. “The ground reality of living in a third world country is sometimes not fully comprehensible to the developed world.”Due to the energy crisis here, mills also prefer to pay overtime and use economically viable gas, than paying the higher cost for back up fuel to run generators. Hence, the weekly holiday is matched to a gas shedding day.Working on festival holidays means compensation of three time’s ordinary pay or two additional holidays. Again, this is higher than for example Sri Lanka where overtime is one and half times the normal hourly rate and holiday pay for work on weekends (Sundays) and public holidays is 1 1/2 times the daily rate.  Similarly, in Bangladesh overtime is twice the rate of basic hourly pay compared to Pakistan’s double gross hourly pay.There are three systems of remunerating workers at present here, First is the salaried method. Though Pakistan is one of the cheapest, garment-producing countries in the world on a per person basis, it is also one of the least productive due to low worker motivation, attributed to a lack of skill and human resource development as well as education in the country. Secondly, this is one of the only countries where men and not women comprise the majority of the work force in the garment industry. Culturally, women only go out of the house to work when there is no other choice and, psychologically, they prefer the security of a stable, fixed salary. Regional competitors, like mills of India, Bangladesh and Sri Lanka have a largely female work force in this field and are converting more to the salary method of worker remuneration.Larger mills that are more experimental in their approach have started a third, blended method where the workers are salaried plus given incentives in the form of extra pay on per piece rate.
Issues arise when the mill fails to register all its employees. Again, A-grade mills make sure they get their employees full benefits. The heftier amount larger mills contribute on their employees’ behalf ensures they have an easier time getting their employees fair treatment; the higher the paid up, the more the clout. Because larger mills enjoy economies of scale, they are also in the position to set up a special department, staffed with three to four employees, the sole job of which is to ensure that their employees receive all the benefits for which they have been registered with and contributing towards the government. There are also cases where mills provide the benefits to their employees themselves, rather on depending on the more at times unreliable government system.

Commissioner Compensation (Lahore), Nadeem Akhtar said that workmen compensation in the case of injury or death also comes under provincial jurisdiction.  The Compensation Act of 1923 defines the parameters of the law regarding this. A minimum of 10 people need to be employed in the establishment for the law to apply. The injury or death is to be reported to the compensation officer, and a specified sum is fixed depending on nature of the injury suffered while working. In case of death, it is Rs. 200,000 ($2,043), to be paid to the next of kin of the deceased. Similarly, if there is a permanent or partial disablement or in case of a minor injury, the recovery time determines the payout.

Comparison of Compensation Laws Between Pakistan and United Kingdom

United Kingdom (developed country)

The United Kingdom currently has a statutory minimum wage but no statutory living wage. Some organizations voluntarily pay a living wage to their employees. The Greater London Authority has calculated the 2014 living wage as £8.80 for London and the Living Wage Foundation has calculated the rate for the rest of the UK – £7.65

United Kingdom labor law

Involves the legal relationship between workers, employers and trade unions.People at work in the UK benefit from a minimum charter of employment rights. This includes the right to a minimum wage of £6.50 for over 21-year-olds under the National Minimum Wage Act 1998, 28 paid holidays and no longer than 48 working hours unless one consents under the Working Time Regulations 1998, the right to leave for child care, and the right to request flexible working patterns under the Employment Rights Act 1996.

The Employment Rights Act 1996 adds that, unless the employee repudiates the relationship, before a dismissal every employer must give reasonable notice after one month of work, and after two years employers must provide a sufficiently fair reason for dismissal and redundancy payments for employees made redundant.

If a company is taken over the Transfer of Undertakings (Protection of Employment) Regulations 2006 state that employees’ terms cannot be worsened, including to the point of dismissal, without a good economic, technical or organizational reason.

Beyond individual rights, workers have the ability to participate in decisions about how their enterprise is managed through a growing set of statutory rights and the traditional models of collective bargaining.

Gradually, the number of “John Lewis” style participatory institutions at work have grown, often mirroring European standards. Workers have the right to co determine how their occupational pensions are managed under the Pensions Act 2004, and how health and safety policies in the workplace are formulated under the Health and Safety at Work Act 1974.

In larger firms with over 50 staff, workers must be informed and consulted about major economic developments, particularly about business difficulties. This happens through a steadily increasing number of works councils, which usually must be requested by staff.

The Trade Union and Labour Relations (Consolidation) Act 1992 sets out rules for the constitution of trade unions, members’ rights, the conditions to be fulfilled before strike action may be taken and the legal status of collective agreements.

Ending employment
The contract can be terminated in various ways:

  • by expiry of the agreed term (temporary contract)
  • notice (dismissal) by employer or employee
  • termination by mutual agreement
  • setting aside of the contract by the cantonal court
  • death of employee

All workers have a statutory right to at least four weeks paid annual leave (20 days paid holiday if his work five days a week).

Working hours
The employer contract will state the number of hours he is expected to work and how much holiday he is entitled to. There are regulations that set out the maximum number of hours a person should work each week. In general young people between school leaving age, and 18 years old should work a maximum of 40 hours a week, or 8 hours a day. For workers of 18 or over the figure is 48 hours a week.

Holiday Entitlement

Pursuant to the Working Time Regulations of 1998, almost all employees in the UK are legally entitled to 5.6 weeks paid holiday time per year (known as statutory leave entitlement or annual leave).  Part-time workers are entitled to a pro-rata amount of holiday pay based upon the 5.6 weeks for full time employees.

Maternity and Paternity Leave 

Employees are entitled to twenty-six (26) weeks of maternity leave which is referred to as “Ordinary Maternity Leave” and can receive either maternity allowance or statutory maternity pay. Some employees are entitled to a longer period of leave, referred to as “Additional Maternity Leave” for another twenty-six (26) weeks for a total of fifty-two (52) weeks per year, if they satisfy certain qualifying conditions.

Pursuant to the Revised Leave Directive, effective March 8, 2013, each parent is now also entitled to eighteen (18) weeks, instead of thirteen (13) weeks, of unpaid leave per child but limited to a maximum of four (4) weeks per year.  Some employers offer longer or more flexible leaves but they must offer at least the minimum amount of leave under the law.


The employer is required to send the employee a written statement explaining why the employer wants to implement the redundancy and hold a consultation meeting. If the employer plans on dismissing more than twenty (20) employees, it must have a group consultation; otherwise the employer may consult employees individually. The employer must always consult with the employees at least 30 days before the dismissal and give them or their representatives written information about the proposed number of dismissals, the effect dismissals will have on the company and alternatives to dismissal.

If the employer is proposing to implement one hundred (100) or more redundancies, effective April 6, 2013, there is now a forty-five (45) day minimum consultation period pursuant to the Trade Union and Labor Relations Consolidation Act. Prior to April 6th, there was a ninety (90) day minimum consultation period

Related Posts

Leave a Comment

fourteen + 8 =