Commentary on Labour Laws / Issues - Amendments in Punjab Social Security Ord.1965 Whether Legal and Valid - Contributions on Actual Wage Or on Wage Ceiling


Two questions/comments on the same subject

Question # 1:

Attached is a letter received from the Director PESSI Rawalpindi for payment of contribution on minimum wages. [ See the letter text on page 12 ].

The payment of contributions in respect of insured employees is made as per the rate and wage ceiling given under section 20 (Amount and Payment of Contribution) of the Social Security Ordinance 1965. The contribution rate was revised from 7% to 6% and Wage Limit of Rs.10000/- was fixed for payment of contribution through Finance Act 2008. The procedure for bringing change in labour laws through Finance Act has already been declared to be illegal and unconstitutional.

In our opinion PESSI cannot demand payment of contribution on the minimum wage since it has no nexus with clause 20 of PESSI Ordinance 1965. The right procedure is to amend the Clause 20 of the referred Ordinance by bringing and passing a bill of Amendments in Labour Laws through Provincial Assembly.

Your opinion is solicited on the issue.

I would like to point out an ambiguity made through Provincial Employees' Social Security (Amendment) Act 2013 whereby the definition of EMPLOYEE given in Section 2(8)(f) has been amended and concept of Minimum Wages ceiling limit for payment of Social Security contribution has been abolished.

In the amended scenario the employer will have to pay contribution at the wages limit fixed by the Governing body U/S/.71 of the Social Security Ord.

In the P.E.S.S. (Amendment) Act 2013 the following amendment in section 20(1) has been made:

  1. for the words "at such rate not more than six percent" the words "at the rate of six percent" shall be substituted; and

  2. In the proviso for the words "four hundred per day or ten thousand rupees per month' the expression "the wages" determined by the Government under Section 71 shall be substituted.

I have gone through the Social Security Amended Act 2013 and observed that now the Employer will pay Social Security contribution at wages limit determined by the Governing body at Rs. 18000/ per month or Rs 750/day wages even for the unskilled workers drawing Rs 10 K wages or Rs.385/per days. Now the concept of payment of S.S. contribution at actual wages up till maximum wages limit Rs.18000/ has been abolished due to blunder made by our law makers.

I have taken up this issue with the Local Directorate but we will have to contest this issue before the court of law.

Copy of Amended Act 2013 is attached kindly examine carefully and advise if you have an other view on this point. Pl. feel free to discuss if clarification is needed.

Answer # 1:

In general any...

To continue reading