Just how protected are Pakistan’s contracted workers?

In Pakistan, the plight of the workforce often escapes the scrutiny of its corporate titans. Labour laws, especially those concerning the rights of contracted workers, have long been an overlooked aspect of the country’s economic landscape. But in December 2017, the Supreme Court of Pakistan delivered a landmark ruling that was set to redefine the rules of the game. The verdict declared that contracted employees should be afforded the same rights as permanent employees—a move that, on paper, was revolutionary. Yet, the question remains: do companies really see it that way?

The court’s decision was expected to send shockwaves through the employment market. It broadened the definitions of contract and third-party employment, and mandated that many of these workers be regularized, even applying this retrospectively. The ruling elevated the status of contracted workers, positioning their rights as a fundamental element of citizenship, not just a legislative afterthought.

Before this ruling, the distinction between permanent and contracted workers was stark. Permanent employees enjoyed the security of better wages, retirement benefits, paid overtime, and the luxury of leaves and vacations. Contracted workers, however, were seen as a disposable extension of the workforce—hired through third parties, they were let go as soon as the seasonal demand subsided.

This system offered companies the flexibility to scale their workforce up or down without the financial burden of long-term benefits. The cost savings were so substantial that many factory owners developed elaborate schemes to keep the majority of their workforce on a contractual basis, even resorting to practices like hiring workers for just 89 days to avoid the 90-day threshold that would require them to be classified as permanent.

The Supreme Court’s ruling aimed to curb these exploitative practices. The intent was clear: it was no longer viable for seths to follow the letter of the law while ignoring its spirit. But what has this meant for companies in the short term?

One immediate impact was the anticipated rise in salary expenses, as companies were now required to treat all employees equally. This raised questions about which sectors would feel the squeeze the most. The auto industry, heavily reliant on contracted labour to meet fluctuating demand, stood out as particularly vulnerable.