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Who is responsible for outsourced employees' profit participation fund?

Illustration: Biplob Chakroborty

The Workers' Profit Participation Fund (WPPF) under the Bangladesh Labour Act, 2006, is a progressive mechanism designed to ensure that employees share in their company's profits. However, this author has observed a concerning trend where WPPF obligations are being imposed on principal companies for outsourced employees—a move that seemingly contravenes the explicit provisions of the law.

When a principal company—a company that outsources work to a contractor—is directed to establish a Workers' Participation Fund (WPPF) that includes outsourced employees, it overlooks the fundamental principles of employment relationships under the Labour Act. This misunderstanding arises from a failure to recognise the distinctions between regular employees and outsourced workers, which has been addressed in key judicial precedents.

Section 233(1)(jha) of the Bangladesh Labour Act, 2006, defines a beneficiary (of a company's profit) as any individual, including apprentices, employed by a company for at least nine months—excluding owners, partners, or board members. However, this seemingly straightforward definition raises critical questions about its application: does it include only direct employees, or can it extend to workers hired through third-party contractors?

The phrase in the definition, "ukto company-te...nijukto rohiyachen" (employed in the company), implies a direct relationship between the employer and the employee. Such an interpretation suggests that workers who are employed and supervised directly by the company qualify as beneficiaries. Outsourced employees, on the other hand, who are recruited and managed by contractors, typically fall outside this scope. This interpretation aligns with the intent of the legislature to prioritise workers who are integral to the company's operational structure over those connected indirectly.

Sections 232-234 of the Act, governing the WPPF, unequivocally apply to workers employed directly by the company. Section 2(49) reinforces this by defining a "worker" as someone directly engaged by the employer. Meanwhile, Section 3A, introduced in a 2013 amendment, acknowledges contractors as employers and mandates their registration with the government. Workers hired under these arrangements are explicitly categorised as employees of the contractor, not the principal company.

Courts in Bangladesh have frequently employed the "control and supervision" test to evaluate the employment relationship. If the principal company exercises significant authority over an outsourced worker's tasks, hours, or overall performance, the worker may be deemed an employee of the company. However, when such direct control is absent, the worker's employment remains firmly with the contractor.

A pivotal decision in the Appellate Division of the Supreme Court of Bangladesh in 2020 clarified the distinction between employees of a principal company and those employed by contractors. Justice Muhammad Imman Ali emphasised that merely working on a company's premises or under an outsourcing agreement does not establish a direct employer-employee relationship. Instead, the contractor is responsible for ensuring statutory benefits, such as appointment letters, leave, and service records.

The court also underscored the legitimacy of outsourcing as a business model while cautioning against its misuse to undermine workers' rights. If contractors fail to meet their obligations, the aggrieved workers must seek remedies against the contractors—not the principal company.

We must adhere to the legal framework and avoid imposing undue obligations on principal companies. Instead, it should be ensured that contractors fulfill their statutory responsibilities, including the establishment of WPPFs for their employees.

Furthermore, companies facing such wrongful impositions should challenge these directives through legal avenues. Courts have consistently upheld the clear distinction between direct employees and outsourced workers, reinforcing the principle that employment obligations must follow the employer-employee relationship as defined by law.

Leveraging judicial precedents, such as the landmark case Md Fazlul Haque Sarder vs Grameenphone Limited, provides valuable insights into resolving ambiguities and aligning practices with the law, ensuring fairness and transparency. Additionally, embracing technology can further enhance compliance by streamlining processes like worker registration, benefits distribution, and performance monitoring. To address the challenges of the modern labour market, the Ministry of Labour and Employment should embrace digital transformation through online registration systems, e-governance tools, and digital compliance platforms. These advancements can simplify processes, make it easier for businesses to meet their obligations, and enhance regulatory oversight.

The definition of "beneficiary" under the Bangladesh Labour Act, 2006, is both inclusive and specific, ensuring that those who are directly employed by a company receive their rightful share of profits under the WPPF. However, outsourced employees remain outside this ambit unless their employment relationship meets strict legal criteria. Judicial clarity on this issue underscores the importance of adhering to statutory obligations and protecting workers' rights at a time when outsourced workforces are being increasingly used.

By delineating the roles of principal companies and contractors, the law strikes a balance between business practices and labour welfare, fostering a more equitable and transparent system for all stakeholders.


Mokarramus Shaklan is an advocate at the Supreme Court of Bangladesh. He can be reached at legalethos@outook.com.


Views expressed in this article are the author's own. 


Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries, and analyses by experts and professionals. To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.


 

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Who is responsible for outsourced employees' profit participation fund?

Illustration: Biplob Chakroborty

The Workers' Profit Participation Fund (WPPF) under the Bangladesh Labour Act, 2006, is a progressive mechanism designed to ensure that employees share in their company's profits. However, this author has observed a concerning trend where WPPF obligations are being imposed on principal companies for outsourced employees—a move that seemingly contravenes the explicit provisions of the law.

When a principal company—a company that outsources work to a contractor—is directed to establish a Workers' Participation Fund (WPPF) that includes outsourced employees, it overlooks the fundamental principles of employment relationships under the Labour Act. This misunderstanding arises from a failure to recognise the distinctions between regular employees and outsourced workers, which has been addressed in key judicial precedents.

Section 233(1)(jha) of the Bangladesh Labour Act, 2006, defines a beneficiary (of a company's profit) as any individual, including apprentices, employed by a company for at least nine months—excluding owners, partners, or board members. However, this seemingly straightforward definition raises critical questions about its application: does it include only direct employees, or can it extend to workers hired through third-party contractors?

The phrase in the definition, "ukto company-te...nijukto rohiyachen" (employed in the company), implies a direct relationship between the employer and the employee. Such an interpretation suggests that workers who are employed and supervised directly by the company qualify as beneficiaries. Outsourced employees, on the other hand, who are recruited and managed by contractors, typically fall outside this scope. This interpretation aligns with the intent of the legislature to prioritise workers who are integral to the company's operational structure over those connected indirectly.

Sections 232-234 of the Act, governing the WPPF, unequivocally apply to workers employed directly by the company. Section 2(49) reinforces this by defining a "worker" as someone directly engaged by the employer. Meanwhile, Section 3A, introduced in a 2013 amendment, acknowledges contractors as employers and mandates their registration with the government. Workers hired under these arrangements are explicitly categorised as employees of the contractor, not the principal company.

Courts in Bangladesh have frequently employed the "control and supervision" test to evaluate the employment relationship. If the principal company exercises significant authority over an outsourced worker's tasks, hours, or overall performance, the worker may be deemed an employee of the company. However, when such direct control is absent, the worker's employment remains firmly with the contractor.

A pivotal decision in the Appellate Division of the Supreme Court of Bangladesh in 2020 clarified the distinction between employees of a principal company and those employed by contractors. Justice Muhammad Imman Ali emphasised that merely working on a company's premises or under an outsourcing agreement does not establish a direct employer-employee relationship. Instead, the contractor is responsible for ensuring statutory benefits, such as appointment letters, leave, and service records.

The court also underscored the legitimacy of outsourcing as a business model while cautioning against its misuse to undermine workers' rights. If contractors fail to meet their obligations, the aggrieved workers must seek remedies against the contractors—not the principal company.

We must adhere to the legal framework and avoid imposing undue obligations on principal companies. Instead, it should be ensured that contractors fulfill their statutory responsibilities, including the establishment of WPPFs for their employees.

Furthermore, companies facing such wrongful impositions should challenge these directives through legal avenues. Courts have consistently upheld the clear distinction between direct employees and outsourced workers, reinforcing the principle that employment obligations must follow the employer-employee relationship as defined by law.

Leveraging judicial precedents, such as the landmark case Md Fazlul Haque Sarder vs Grameenphone Limited, provides valuable insights into resolving ambiguities and aligning practices with the law, ensuring fairness and transparency. Additionally, embracing technology can further enhance compliance by streamlining processes like worker registration, benefits distribution, and performance monitoring. To address the challenges of the modern labour market, the Ministry of Labour and Employment should embrace digital transformation through online registration systems, e-governance tools, and digital compliance platforms. These advancements can simplify processes, make it easier for businesses to meet their obligations, and enhance regulatory oversight.

The definition of "beneficiary" under the Bangladesh Labour Act, 2006, is both inclusive and specific, ensuring that those who are directly employed by a company receive their rightful share of profits under the WPPF. However, outsourced employees remain outside this ambit unless their employment relationship meets strict legal criteria. Judicial clarity on this issue underscores the importance of adhering to statutory obligations and protecting workers' rights at a time when outsourced workforces are being increasingly used.

By delineating the roles of principal companies and contractors, the law strikes a balance between business practices and labour welfare, fostering a more equitable and transparent system for all stakeholders.


Mokarramus Shaklan is an advocate at the Supreme Court of Bangladesh. He can be reached at legalethos@outook.com.


Views expressed in this article are the author's own. 


Follow The Daily Star Opinion on Facebook for the latest opinions, commentaries, and analyses by experts and professionals. To contribute your article or letter to The Daily Star Opinion, see our guidelines for submission.


 

Comments

কারওয়ান বাজারে মালয়েশিয়াগামীদের সড়ক অবরোধ করে বিক্ষোভ

ঢাকার কারওয়ান বাজারে সড়ক অবরোধ করে বিক্ষোভ করছেন মালয়েশিয়া যেতে ইচ্ছুক একদল মানুষ। আজ সকাল পৌনে ১১টার দিকে কারওয়ান বাজারে হোটেল সোনারগাঁওয়ের বিপরীত পাশে পান্থপথে ঢোকার রাস্তাটি অবরোধ করেন তারা।

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