Revised Figures Used in the Procedure for Wppf Calculation for 2015-16

Author:Dr. Perwez Shafi

Based on the WPPF law and the Supreme Court judgment (November 10, 2016), following methodology may be used to calculate share of workers in Companies Profits (Workers’ Participation) Act, 1968. The figures are revised but the calculation procedure is the same. This can be used all over Pakistan except in Sindh where new law (2015) on the subject superseded all legal controversies.

  1. Adjust or extrapolate old figures to arrive at new revised figures.

    To comply with the Supreme Court judgment (Nov. 2016) and its impact on WPPF law, there were three factors -- Wage Categories, minimum wage, and multiplier figure in paragraph 4(d). The first two of 2006 factors have to be adjusted or extrapolated taking into account time and inflation to arrive at new values of 2016. Once that adjustment or extrapolation has taken place through sound and valid legal and accounting principles then WPPF calculation can be perform easily.

  2. 2006 Wage Categories, also required by the WWF letter, as follows:

    Cat. I -- Rs. 5,000. Minimum Wage

    Cat. II -- Rs. 5,001.-- Rs. 7,500. 50% increase from Min. Wage.

    Cat. III -- Rs. 7,501.-- Rs. 10,000. 100% increase from Min. Wage.

    Maximum share limit of each worker was three (3) times the min. wage.

  3. Extrapolate the 2006 Wage Categories to 2016 by using the above formula of extrapolation.

    It is a standard legal and accounting practice to use compound interest to calculate the future value of the present amount by extrapolation or conversely the present value of the past amounts. For instance, exact same loan or wages in 2006 will have much higher value today by taking into account years or decades of inflation and cost of living. This is accommodated by compound interest.

    Since the formula for extrapolation is based on 2006 Wage Categories, and minimum wage was Rs. 13,000 in 2015-16, the revised 2016 Wage Categories becomes:

    Cat. I -- Rs. 13,000.

    Cat. II -- Rs. 13,001.-- Rs. 19,500.

    Cat. III -- Rs. 19,501.-- Rs. 26,000.

  4. Multiplier figure before Finance Act, 2007 in paragraph 4(d) of the WPPF Scheme:

    The multiplier figure after Finance Act, 2007 took effect in paragraph 4(d) of the WPPF law until now is “four (4) times” of minimum wage to calculate the maximum share limit of each worker. The multiplier figure is not a monetary value which change over time hence no need to extrapolate and remains the same today as well as in 2006 before the amendments in Finance Act, 2007 took effect.

    Therefore, after Supreme Court...

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