The Companies' Profits (Workers' Participation) Act, 1968

Updated: Friday November 20, 2009/AlJumaa Thoul Hijjah 03, 1430/Sukravara Karthika 29, 1931, at 02:49:01 PM

The Schedule

(Scheme)

[See section 2(e)]

1. Scope of the scheme.---The scheme applies to all companies engaged in industrial undertakings which satisfy any one of the following conditions, and to such other companies as the [1][Federal] Government may, by notification in the official Gazette, specify in this behalf, namely:---

(a) The number of workers employed by the company at any time during a year is 50 or more.

(b) The paid-up capital of the company as on the last day of its accounting year is [2][five million rupees] or more.

(c) The value of the fixed assets of the company (at cost) as on the last day of the accounting year is [3][twenty million rupees] or more:---

[4][Provided that for a company established on or after first day of July 2018.]

Explanation.---In this scheme,---

(a) “industrial undertaking” means an institution, organization, enterprise or establishment which involves the use of electrical, mechanical, thermal, nuclear or any other form of energy transmitted mechanically and not generated by human or animal agency and which is engaged in any one or more of the following operations, namely:---

(i) the subjection of goods or materials to any manufacturing, assembly, finishing or other artificial or natural process, which changes their original condition or adds to their value;

(ii) [5][* * * * * * ;]

(iii) the transformation, generation, conversion, transmission or distribution of electrical energy, including hydraulic power; and

(iv) the working of a mine, oil well or any other source of mineral deposit, including blending, refining and purification of oils and gases;

and includes companies engaged in the marketing and distribution of gas or oil in the carriage of men or goods by sea of air, and any other institution, organization, enterprise or establishment which the [6][Federal] Government may, by notification in the official Gazette, declare to be an industrial undertaking for the purposes of this scheme; and

(b) references to the paid-up capital and the value of the fixed assets of the company shall, in the case of a company incorporated outside Pakistan but having a branch in Pakistan, be construed as references respectively to the capital invested in such branch and the value of the fixed assets of the branch.

2. Investment of Fund.---(1) The amount allocated or accruing to the Fund shall be available to the company for the business operations. The company may, however, request the Board to utilize the amount in the Fund for investment under sub-paragraph (7) and the Board may decide to so invest the amount.

(2) The company shall pay to the Fund in respect of the amount in the Fund available to it for its business operations as aforesaid interest at the rate of 2½% above the bank rate or 75 per cent of the rate at which dividend is declared on its ordinary share, whichever is higher. In case there is ore than one class of ordinary shares on which different rates of dividend have been declared, then the weighted average of the different rates of dividend shall be taken for the purpose of determining the rate of interest. The interest to the Fund shall accrue on and from the first day of the year next succeeding the year in which the scheme becomes applicable to the company. Even the company does not wish to utilize the amount available to it under sub-paragraph (1), interest at the rate aforesaid shall be payable by the company for the period between the date of allocation of any amount to the Fund and the date of its investment under sub-paragraph (7).

(3) If, at any time after the establishment of the Fund, the company raises any additional capital, otherwise than through the issue of bonus or bonus shares, the Fund shall have the first option to convert any amount available to the company under sub-paragraph (1) or any of the assets of the Fund into ordinary equity capital up to a ceiling of 20 per cent of the paid-up capital of the company prior to such conversion or 50 per cent of the additional capital, whichever is less.

Explanation.---In this sub-paragraph, “additional capital” does not include any capital offered or to be offered to foreign participation of the company.

(4) For the exercise of the right of conversion under sub-paragraph (3), the Board shall be given sufficient time to sell assets of the Fund to raise the amount needed for subscription to the additional issue of capital by the company.

(5) The shares acquired in the manner set out in sub-paragraph (3) shall participate in future bonus and right issues in the same manner as other shares.

(6) The shares acquired in the manner set out in sub-paragraph (3) shall carry voting rights in the same manner as other shares and such voting rights shall be exercised by the Board on behalf of the Fund.

(7) The amount in the Fund which, under sub-paragraph (1), the company has requested to be utilized for investment under this paragraph may be invested by the Board of the purchase of any of the following, namely:---

(a) I.C.P. Mutual Fund Certificates;

(b) National Investment Trust (Unit) Certificates;

(d) any other securities approved for the purpose by the [7][Federal] Government.

3. Eligibility to benefits of scheme.---All workers shall be eligible to the benefits of the scheme and to participate in the Fund. However, a worker not completing six months of employment with the company during a year of account shall not participate in the Fund in respect of that year.

4. Distribution of benefits to workers.---The share of a worker in the annual allocation to the Fund shall be expressed in units or fractions of units (worked out to two places of decimal) of the face value of Rs. 10 determined in the following manner, namely:---

(a) The number of available units shall be so divided into three parts for the three categories of the workers mentioned below that a worker in the first of those categories gets four units for each two units that a worker in the second of those cate4gories gets or for each one unit that a worker in the last of those categories gets.

Categories

1. [8][Workers drawing average monthly wages not less than the minimum wages for unskilled workers prescribed, from time to time, by the Government.]

2. [9][Workers drawing average monthly wages exceeding the minimum wages for unskilled workers prescribed, from time to time, by the Government but not exceeding twenty two thousand rupees.]

3. [10][Workers drawing average monthly wages exceeding twenty two thousand rupees.]

(b) The average monthly wages shall be rounded up to the nearest Rs. 10.

(c) The number of units available to each category of workers shall be divided equally among all the workers in that category to determine the share of each worker of that category.

(d) [11][Notwithstanding anything contained in this scheme, no worker shall, in any one year, be entitled out of the annual allocation of units exceeding the amount of four times the minimum wages for unskilled workers as given in the Schedule of the Punjab Minimum Wages for Unskilled Workers Ordinance, 1969 (XX of 1969) in value in so far as such allocation is relatable to clause (b) of subsection (1) of section (3).]

Explanation.---In this paragraph, “average monthly wages” means total wages drawn during the year of account divided by 12, or by the number of months a worker actually worked during a year in respect of which he is entitled to the benefit under the scheme, as the case may be, and “wages” has the same meaning as in clause (vi) of section 2 of the Payment of Wages’ Act, 1936 (IV of 1936), but does not include any overtime allowance or bonus.

5. Disbursement of benefits.---The disbursement of the benefits from the Fund shall be as under:---

(a) 100 per cent of the annual income of the Fund, including capital gains realized, shall be distributed each year to workers in proportion to their units of entitlement.

(b) A worker who voluntarily leaves the employment of the company or whose services are terminated shall be entitled to receive 100 per cent of the net asset value of the units standing in his name;

(c)

(d)

(e)

(f) A worker who continues in the service of the company shall be entitled to receive 100 per cent of the net asset value of the units in his name each year or he may choose to leave his share in the Fund:---

Provided that a worker while in employment may choose to encash all the units standing in his name at any time at his discretion; and

(g) A worker, in the event of his retirement or, his nominated beneficiary, in the event of the worker’s death (from whatsoever cause) while in the employment of the company, shall receive 100 per cent of the net asset value of the units standing in the worker’s name.

6. Definition of the net asset value of the unit.---To determine the net asset value of a unit, the total net assets of the Fund, namely, market value of the securities, cash and other assets resulting from the investment and re-investment, capital accretion thereto and all incomes of any kind arising therefrom shall be divided by the number of units in the Fund. Net asset value of the entire Fund shall be computed once every year and each worker’s unit entitlement determined at the same time. Additional units will be given to the workers according to the amount they voluntarily contribute to the Fund.

7. Employee’s own contribution.---A worker may voluntarily choose to contribute a part of his wages, cash bonus, dividend or interest to the Fund. For each unit of contribution, he shall receive credit for 1¼ units. Contribution received during the course of a year of account shall, however, be deemed to be contribution received on the last day of that year. If at any time a worker chooses to leave the employment of the company or his services are terminated or in the event of his retirement or death or on the expiry of three years from the date he voluntarily chooses to contribute a part of his wages, cash b0onus, dividend or interest to the Fund, he, at his option, or, in the event of his death, his nominated beneficiary may, receive the net asset value to the units representing his contribution. The contribution by a worker in any one year of account shall not exceed 10 per cent of his annual wages during such year.

8. [12][* * * * * * * *]

9. Tax treatment of the income o the fund.---[13][The Government may approach the Federal Government for exemption of the income tax on the income of the Fund including capital gains.]

10. Tax treatment of the income to the workers.---All sums paid out by the Fund shall be exempt from income tax in the hands of the workers.

11. Working and location of the Board of Trustees.---The office of the Board of Trustees shall be located at the factory premises or, if there is more than one factory run by the company, at the registered head office of the company. All expenses of the Board, inducing the cost of maintaining accounts, shall e borne by the company.

12. Audit of the Fund accounts.---The Fund accounts shall be audited annually at the company’s expense in the same manner as the accounts of the company are audited.

Provided that the [14][Federal] Government may, at its own cost, appoint independent accountants for a special audit of the accounts of the Fund.

13. Scheme’s benefits to be in addition to other benefits.---The benefits to a worker under this scheme shall be in addition to, and not in derogation or substitution of, any other benefits to which the worker may be entitled under any other law, contact, terms and conditions of employment or otherwise.

14. Special provisions for industries working seasonally.---Notwithstanding anything contained in this Act or this scheme, the [15][Federal] Government may, by notification in the official Gazette, make special provisions for the participation of workers in the profits of companies engaged in industrial undertakings which operate only for a part of the year.

15. Companies engaged in more than one industrial undertakings.---Notwithstanding anything contained in this Act or this scheme, the [16][Federal] Government may, at the request of a company which is engaged in more than one industrial undertakings located at different places, permit the splitting up of the Fund amongst the various undertakings or groups of undertakings and constitution of a Board of Trustees for each such undertaking or group of undertakings; and thereupon the provisions of this Act and this scheme shall have effect in relations to such undertakings or groups as if each such undertaking or group were a company.

16. Entrustment of management of Fund to Investment Corporation of Pakistan, etc.---The Board of Trustees may, with the prior approval of the [17][Federal] Government enter into a contract with the Investment Corporation of Pakistan, the National Investment Trust or the National Bank of Pakistan, entrusting the management of the Fund to that Corporation, Trust or Bank on such fee, which shall be payable by the company, and on such terms and conditions as may be mutually agreed upon.

[1] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[2] Inserted by section 10(a)(i) (a) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[3] Inserted by section 10(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[4] Inserted by section 10(a)(i) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[5] Omitted by section 10(b)(ii) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[6] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[7] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[8] Substituted by section 10(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[9] Substituted by section 10(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[10] Substituted by section 10(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[11] Substituted by section 10(c) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[12] Omitted by section 10(d) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[13] Substituted by section 10(9) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[14] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[15] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[16] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

[17] Omitted by section 3(b) of the Companies Profits (Workers’ Participation) (Amendment) Ordinance, 2018 (Ordinance No. VII of 2018), published in Gazette of the Punjab Extraordinary, vide No. Legis: 13-77/2010(C)(P-I), dated 01-06-2018.

The Companies’ Profits (Workers’ Participation) Rules, 1971

The Companies’ Profits (Workers’ Participation) Act, 1968

Model procedure for the maintenance of accounts of Workers’ Participation Fund