FEBRUARY 24-2006
Flexible Labor Laws in Textile Industry
Majyd Aziz
(Ex-Chairman SITE Association of Industry)
The garment and knitting units in Pakistan are abundant in the small and medium sector, primarily labor-intensive, with workers generally under the labor contract system. A designated contractor is the primary employer and these units are secondary employers. The system works well for the employers since they have more productive workers without having them on company rolls. In most of the cases, the workers have assumed the position of migrant workers with frequent mobility from one unit or one contractor to another. They normally get better paychecks since their remuneration is production-based but they are deprived of statutory bonus, gratuity, social security, EOBI, and job security.
The garment and knitting industries, especially export-based, are dependent on job orders and are susceptible to external factors, such as anti-dumping, tough competition, political instability, etc. Since there could be gaps in receiving orders, the employers have no alternative but to rely on contract workers. The exporters usually demand that the contractor must have trained and skilled workers on rolls so that there are assurances of on-time production, acceptable quality, and better productivity. The worker is easily replaced if unable to produce the desired quality and quantity.
The female contract workers are also not eligible for maternity leave benefits, child care, customized working schedules, and gender equality. A large female workforce is actively employed in apparel and knitting units. The high poverty rate, the need to supplement family income, the shortage of skilled male workers, and job opportunities has ensued into a growing demand for them.
The exporting units in Pakistan are now in a different ball game. The elimination of the quota regime, the buyer’s demand for excellent quality at world prices with emphasis on delivery, means that the present reliance on status quo could spell disaster. Social compliance would take predominance in the working environment. The major apparel buyers have already instituted Codes of Conduct with company-certified inspections before orders are placed. The introduction of modern production techniques and equipment has now assumed greater importance. Improving job quality, especially in the small and medium organizations, has become a paramount exercise. Pakistany garment and knitting manufacturers are still exposed to the prevalent socio-economic and religious-cultural norms. Delays in decision making, taking short cuts when it comes to improving the working conditions, or even the tendency to continue reliance on ad-hoc measures, would no more cut ice and could be the causes for the closure of units.
Another serious issue is that the labor laws are not in conformity with the present global economic scenario. Successive governments did set up Committees, Task Forces, and presented Labor Policies but all these efforts made no impact on the antiquated labor laws. Pakistany industries are at a formidable disadvantage if they adhere to the provisions of these laws. The Workers Employers Bilateral Council of Pakistan (WEBCOP), a visionary venture of moderate employers and workers, has often proposed fundamental and pragmatic amendments. Yet, the old labor laws are still on the statute books.
The situation in most of the industries is that inspite of the dependence on contract workers, the staff members, lower cadre managers, and senior executives, tend to have stable employment security. The reliance on contract workers is mostly for production departments that do have longer tenure workers. While the contract worker may list job insecurity as a major concern, the tenured employee is more comfortable in that position. Although comparable data is not available in Pakistan on employee tenure in same organization, data can be given for other countries. In 2002, the average German worker had tenure of 10.7 years with the same employer; the average French worker had 11.3 years, the average British for 8.1, and the average American for 6.6 years. However, the Greeks had the longest tenure with the average worker staying 13.2 years with the same employer, while the Japanese had 12.2 years and the Italians 12.1 years.
Another point to mention is that nowadays industries in Pakistan have developed practical Human Resource policies where employing permanent workers is tacitly discouraged. The managers are advised to appoint workers on “non-permanent” basis and avail the loopholes in labor laws to circumvent the statutory requirements. Many company executives base this strategy on the fact that a longer tenure means a more cumulative salary package, an increase in allocation for future statutory payments to employees, and a general impression that a longer tenure plus job security is, in effect, detrimental to productivity of the worker.
All the above factors tend to diminish the competitive position of the Pakistany apparel and knitting units whose survival depends on being able to meet buyer’s criteria, requirements, and policies. However, providing full employment with all statutory and negotiated benefits and facilities would render many companies uncompetitive. The labor wage bill, under the present draconian and out-dated labor laws, coupled with the social compliance regulations, would sound the death-knell for these units. The industrial base would again become vulnerable to radical elements that could misguide the workforce to undertake actions that could spark massive industrial unrest in the country.
Fortunately, an idea is gaining acceptance in India to counter such apprehensions. A bill is being introduced in the Indian Parliament that would allow industrial units in the textile sector to employ “non-permanent” workers if they could furnish bank guarantees against the names of these workers, earmarking their wages against a specified minimum employment period during a year. The proposal envisions keeping these “non-permanent” workers outside the ambit of the existing labor laws. However, the workers would have to be guaranteed a minimum employment period of about 150 days. More importantly, the bank guarantee clause is intended towards eliminating the middle-man and instead having a direct linkage between the primary employer and the temporary worker. At the same time, though the “non-permanent” worker would not be on the rolls of the company, yet would be eligible for an identity card from it. The above proposal is doable and would be appreciated by many industries in Pakistan.
WEBCOP, employer’s organizations, labor federations, and government officers, must join together to tackle the labor issues on a fast-track basis. Procrastination and political weaknesses have retarded export potential. A holistic strategy be developed and promoted to achieve the export objectives since the country’s priorities, such as poverty alleviation, industrial development, foreign exchange reserves enhancement, and general prosperity, all depend on a satisfied worker producing an excellent quality thru better productivity and by earning substantial emoluments.
The garment and knitting industries, especially export-based, are dependent on job orders and are susceptible to external factors, such as anti-dumping, tough competition, political instability, etc. Since there could be gaps in receiving orders, the employers have no alternative but to rely on contract workers. The exporters usually demand that the contractor must have trained and skilled workers on rolls so that there are assurances of on-time production, acceptable quality, and better productivity. The worker is easily replaced if unable to produce the desired quality and quantity.
The female contract workers are also not eligible for maternity leave benefits, child care, customized working schedules, and gender equality. A large female workforce is actively employed in apparel and knitting units. The high poverty rate, the need to supplement family income, the shortage of skilled male workers, and job opportunities has ensued into a growing demand for them.
The exporting units in Pakistan are now in a different ball game. The elimination of the quota regime, the buyer’s demand for excellent quality at world prices with emphasis on delivery, means that the present reliance on status quo could spell disaster. Social compliance would take predominance in the working environment. The major apparel buyers have already instituted Codes of Conduct with company-certified inspections before orders are placed. The introduction of modern production techniques and equipment has now assumed greater importance. Improving job quality, especially in the small and medium organizations, has become a paramount exercise. Pakistany garment and knitting manufacturers are still exposed to the prevalent socio-economic and religious-cultural norms. Delays in decision making, taking short cuts when it comes to improving the working conditions, or even the tendency to continue reliance on ad-hoc measures, would no more cut ice and could be the causes for the closure of units.
Another serious issue is that the labor laws are not in conformity with the present global economic scenario. Successive governments did set up Committees, Task Forces, and presented Labor Policies but all these efforts made no impact on the antiquated labor laws. Pakistany industries are at a formidable disadvantage if they adhere to the provisions of these laws. The Workers Employers Bilateral Council of Pakistan (WEBCOP), a visionary venture of moderate employers and workers, has often proposed fundamental and pragmatic amendments. Yet, the old labor laws are still on the statute books.
The situation in most of the industries is that inspite of the dependence on contract workers, the staff members, lower cadre managers, and senior executives, tend to have stable employment security. The reliance on contract workers is mostly for production departments that do have longer tenure workers. While the contract worker may list job insecurity as a major concern, the tenured employee is more comfortable in that position. Although comparable data is not available in Pakistan on employee tenure in same organization, data can be given for other countries. In 2002, the average German worker had tenure of 10.7 years with the same employer; the average French worker had 11.3 years, the average British for 8.1, and the average American for 6.6 years. However, the Greeks had the longest tenure with the average worker staying 13.2 years with the same employer, while the Japanese had 12.2 years and the Italians 12.1 years.
Another point to mention is that nowadays industries in Pakistan have developed practical Human Resource policies where employing permanent workers is tacitly discouraged. The managers are advised to appoint workers on “non-permanent” basis and avail the loopholes in labor laws to circumvent the statutory requirements. Many company executives base this strategy on the fact that a longer tenure means a more cumulative salary package, an increase in allocation for future statutory payments to employees, and a general impression that a longer tenure plus job security is, in effect, detrimental to productivity of the worker.
All the above factors tend to diminish the competitive position of the Pakistany apparel and knitting units whose survival depends on being able to meet buyer’s criteria, requirements, and policies. However, providing full employment with all statutory and negotiated benefits and facilities would render many companies uncompetitive. The labor wage bill, under the present draconian and out-dated labor laws, coupled with the social compliance regulations, would sound the death-knell for these units. The industrial base would again become vulnerable to radical elements that could misguide the workforce to undertake actions that could spark massive industrial unrest in the country.
Fortunately, an idea is gaining acceptance in India to counter such apprehensions. A bill is being introduced in the Indian Parliament that would allow industrial units in the textile sector to employ “non-permanent” workers if they could furnish bank guarantees against the names of these workers, earmarking their wages against a specified minimum employment period during a year. The proposal envisions keeping these “non-permanent” workers outside the ambit of the existing labor laws. However, the workers would have to be guaranteed a minimum employment period of about 150 days. More importantly, the bank guarantee clause is intended towards eliminating the middle-man and instead having a direct linkage between the primary employer and the temporary worker. At the same time, though the “non-permanent” worker would not be on the rolls of the company, yet would be eligible for an identity card from it. The above proposal is doable and would be appreciated by many industries in Pakistan.
WEBCOP, employer’s organizations, labor federations, and government officers, must join together to tackle the labor issues on a fast-track basis. Procrastination and political weaknesses have retarded export potential. A holistic strategy be developed and promoted to achieve the export objectives since the country’s priorities, such as poverty alleviation, industrial development, foreign exchange reserves enhancement, and general prosperity, all depend on a satisfied worker producing an excellent quality thru better productivity and by earning substantial emoluments.
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