How US based Companies are violating Pakistani Labor Laws

Business Case:

Nespon Solutions USA - Principal Company

Digital Process Pakistan - Representative Company

Nespon Solutions (NS) run by Umar Fazal created a joint venture with his brother Zain Fazal through his
local company Digital Process (DP). Initially DP started hiring people on behalf of the NP. The employees
were told that within a year the company NP will be formed in Pakistan and till that time they will be given
an employee contract from DP. Also, a number of promises were made, like proper PFund for employees,
$ based salaries, flexible timings, remote work, leave encashment, overtime payment, tax free etc. We
will look into this stuff one by one:

Delay in Salary and Salary Tax

A number of employees left their organization based on those promises. The first shocked they get when
they come to know that the company will pay the salary after 15 days of the month end. Thereafter, the
salary was paid in PKR based on the exchange rate prevailed on date of contract. Also, the PKR salary was
subject to taxation, due to the DP legal status. Nobody knows if the tax amount deducted from the salary
of employee is actually deposited into government account. This was verified by many employees on FBR
portal, that their tax amount is not deposited in to government account. When asked, it was informed
that it will be paid at the year end. So now one can imagine, if someone leaves before the year end, he
has to pay his tax again, because the company did not deposit the salary tax and employee remain under
impression that his tax is deducted and paid.

Overtime

All employees are required to submit their timesheet on fortnightly basis, in order to claim the amount
from NS. NS, as per the legal laws in US pay back the amount within 7 days of submission. This includes
any overtime an employee has worked due to project. The same is approved by the customer and paid to
NS. However, DP does not pay even a single penny on the context that they have not yet received. When
we contact other companies working in India, Sri Lanka, they confirmed that they get the money and pay
to the employee immediately, as it is their right.

Dollar based vs PKR

The employees were promised to be paid in $, so any employee who was hired before PDM government
might have felt the heat of devaluation. AN example is the developer who was hired for $1000 before
PDM government when PKR was Rs. 180. He will get the same salary at the rate of hiring i.e., Rs. 180,000.
A number of complaints were raised with DP and NS, but these 2 brothers did not listen, rather, they make
fake promise to look into it in next performance meeting.

The performance meeting held once a year, and again instead of revaluing the salary of employee to
current exchange rate, they decreased the salary of same employee to $900. When we checked with other
companies working in other sub-continent region, they informed that either they pay $ to the employee
or gave local adjustment to employee in their local currency.
Leave Quota

The NS/DP model has violated another labor law by providing only 1 day per month i.e., 12 days per
annum, against 30 days labor laws requirement. Additionally, the company does not provide any extra
payment for working on Pak Government official Holidays.

Provident Fund/ Medical Insurance

Either Company makes it clear that it is a US based company and will not follow Local Laws, Or, accept the
local laws and provide the relevant allowances. As they show themselves as Foreign and work as local, the
employees are really in a bad situation, where should they lodge complaint, either Pakistan Laws and US
Laws. Also, by introducing fake PFund, the local company plays another game with employees that if they
resign before completing 1 year, they are not entitled to any PFund, including their own share. This is
another huge labor law violation played by these companies.

Notice Period

As per local contract issued by DP, there is a clause to serve notice period, if resignation is submitted by
employee. Recently, the NS fired around 12 employees on a short notice of 2 hours without any
compensation. This is even against the US law where the employer has to pay 3 months’ salary, if the
company fires an employee. DP did not pay any notice period salary that they might have received from
NS. They only paid 1 month salary after all the employees warned them to leave if they do not pay to the
employee fired by them without any notice.

Flexible Timing/Remote

At the time of employment, they promise that timings are flexible and remote work is encouraged,
however, the DP ask all employees to come to office at 11, stay in the office, doing nothing, as the US
office starts at 4 pm. These 5 hours are extra that they have to stay in Office just to keep ZF local mindset
happy. This means 5 hours plus 8 hours US timing, the employee actually ends up working 13 hours per
day.

These are few examples of mis commitment and in-human behavior of local representative company.
Other example where ladies are harassed, employee are abused for complaining to head office or their
salaries are retained, if they post anything on social media; are common in this industry.

Conclusion

Based on above facts, which were confirmed from various employees of NS/DP in Pakistan, following are
the recommendations

a. The company should decide how it wants to operate. If it wants to carry US logo, than employee
should be treated as per US laws and their salary should be directly credited from US account, so
that they can claim it Non Taxable Salary and country get benefit from Inwards Remittance.
b. It is high time for the government to provide rules and regulation to streamline the foreign
companies utilizing their local arms and manipulating the laws to benefit them only.

Note
This content of the article is verified by the employee who recently resigned. Other employee in other
companies may come forward and share their own story.