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Labour Laws Compliance Checklist

I
S. No.
Scope of the Scheme

Gratuity
YES

NO

N/A

1.

Does the status of the employer come under the definition of commercial or industrial establishment as defined in West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (the Ordinance)? If the answer to 1 above is Yes, does it satisfy the following conditions: 2.1 The number of workmen employed is 20 or more in case of commercial establishment; or 2.2 The number of workmen employed is 50 or more in case of industrial establishment.

2.

3.

If the answer to 1 and 2 above are Yes does the employer pay gratuity to workman on his retirement, resignation or termination of service due to any reason other than misconduct?

4. 5.

Is gratuity payable only to a person who is a workman as defined in the Ordinance? Is gratuity payable in addition to any other benefit which the worker may be entitled in accordance with the terms of his employment or any custom, usage settlement or award? [Note that, no gratuity is payable during the period an employer has established a provident fund in his establishment with equal contribution by the employer and workman, and both these contribution being payable to the workman even if he dismissed from service due to any reason including misconduct.]

6.

Is the rate of gratuity 30 days wages for every completed year of service or for any period in excess of six months in the same establishment?

S. No. 7. If answer to 6 above is Yes is gratuity calculated in the following manner: 7.1 Wages admissible to workman in the last month of service in case of fixed rated workman and highest pay drawn during the last twelve months in case of piece rated workman. 7.2 Wages include basic wage plus cost of living allowance and any other allowance being part of wages under the relevant law. 8. 9. Does the employer maintain funded gratuity? If answer to the above is Yes, is it an approved gratuity fund as defined under section 2(3) of the Income Tax Ordinance, 2001 (ITO). If answers to 8 to 9 are Yes, has the employer established a fund under an irrevocable trust? Does the gratuity fund satisfy the following conditions:
a) b) not less than ninety percent employees of the Company are employed in Pakistan; the beneficiaries belong to the class of persons qualified in terms of sub-clause (b) of clause 2 of Part III of the sixth schedule of the Income Tax Ordinance, 2001; the employer contributes to the fund; and all benefits granted by the fund are payable only in Pakistan.

YES

NO

N/A

10. 11.

c) d)

12.

Is the annual contribution by the employer in respect of any particular employee made on a reasonable definite basis as approved by the Commissioner of Income Tax? Has the employer furnished returns, statements, etc., as required by notice from Commissioner of Income Tax

13.

under rule 7 of part III of the Sixth Schedule of ITO?

S. No. 14. Are all moneys contributed to the fund and interest / return on the accumulated balances of such contribution invested as per Rule 102 of the Income Tax Rules, 2002 (ITR) together with section 227 of the Companies Ordinance, 1984? Has the prior approval of the Commissioner of Income Tax been obtained to make a special contribution to the fund to meet the deficit? Has effective arrangement been made to deduct tax at source from any payments made from gratuity which is chargeable to tax? Have the rules of gratuity fund formulated by the trustees been complied with? Note that if there is a repugnance between any rule of an approved gratuity fund and any provision of part III of Sixth Schedule of the Income Tax Ordinance, 2001, the said rule shall, to the extent of repugnance, be of no effect and the Commissioner of Income Tax, at any time require that, such repugnance shall be removed from the rules of the fund. 18. Does the employer cause to carry out actuarial valuation to determine cost and liability on account of retirement benefit? Has the company made full provision in the financial statements in accordance with IAS-19. If answer to 19 is No (a) has it been disclosed in the notes to the accounts any shortfall or reason etc? (b) have been made reference in the auditors report? In case of outstanding balance of an eligible employee who is retired, has the company / fund shown the balance payable to him in current liability under outgoing members? In case of unfunded gratuity. Is the liability to existing employees shown as deferred liability in the financial

YES

NO

N/A

15.

16.

17.

19. 20.

21.

22.

statements of the company?