Workers’ Profit Participation Fund: Legal Position of Trans-Provincial Establishments in Pakistan

The Eighteenth Amendment abolished the Concurrent Legislative List, resulting in the devolution of legislative competence over various matters, including labour welfare, to the provinces. Following the Amendment, provincial legislatures introduced their own legislative measures concerning the Workers’ Profit Participation Fund (WPPF). Nevertheless, the question of whether federal or provincial authorities are competent to demand and recover WPPF contributions from trans-provincial establishments continues to be a matter of legal dispute.

The Council of Common Interests and the Federal Framework

The issue of federal and provincial jurisdiction was considered by the Council of Common Interests (CCI) in its meeting held on 23 December 2019. The CCI decided that the Workers’ Welfare Fund (WWF), being a trans-provincial and inter-provincial matter, would remain with the Federal Government until a mutually agreed mechanism was developed between the Federation and the provinces. (CCI Decision No. CCI.14/1/2019, dated 23 December 2019.)

Although the CCI decision specifically addressed WWF, the subsequent meeting of the committee constituted pursuant to the CCI arrangements, held on 2 October 2020, also addressed contributions by trans-provincial establishments under the Companies Profits (Workers’ Participation) Act, 1968. The agreed arrangement contemplated that companies having offices in two or more provinces would continue contributing through the federal mechanism involving the Federal Board of Revenue (FBR). (Hyundai Nishat Motor, 2026 LHC 4044, paragraphs 9–10.)

Judicial Interpretation

The Lahore High Court recently considered this jurisdictional question in M/s Hyundai Nishat Motor (Pvt.) Ltd. v. Province of Punjab (2026 LHC 4044). The Court set aside recovery notices issued by the Punjab Employees Social Security Institution (PESSI) for WWF and WPPF contributions against trans-provincial establishments, holding that the notices were inconsistent with the prevailing arrangements made pursuant to the CCI decision.

The Court recognised that the issue had not yet been finally resolved between the Federation and the provinces and that the existing arrangement was to continue pending its resolution by the competent forum.

Statutory Obligations and the Appropriate Payment Mechanism

Under sections 3 and 4 of the Companies Profits (Workers’ Participation) Act, 1968, a company covered by the Act is required to establish a Workers’ Participation Fund and constitute a Board of Trustees for its administration. Furthermore, paragraph 4(d) of the Scheme appended to the Act provides for the transfer of the amount remaining after the prescribed allocation to eligible workers to the Workers’ Welfare Fund.

In light of the CCI arrangements and the judicial position recognised in Hyundai Nishat Motor (2026 LHC 4044), trans-provincial establishments have a substantial legal basis for complying with their applicable WPPF obligations under the federal framework rather than responding to provincial recovery demands inconsistent with those arrangements.

However, this remains an interim legal position. The question of final discharge of obligations under competing federal and provincial legislation remains subject to a mutually agreed federal-provincial mechanism or a final determination by the competent superior court.