Can a contract employee become the company's own worker?

Key points

• A contractor's name on the paper does not settle it: workers "engaged directly or through a contractor, would be deemed to be the employees of the company for whose benefit they perform functions" (para 11).
• The test is control and supervision, financial risk, the plant, machinery and premises, and the raw material (para 7), along with who appoints you, who pays you and who can dismiss you (para 11).
• In this case the company's own attendance sheets and pay from its own account decided it, and its three contractor agreements had all expired (para 5).
• Outsourcing itself is lawful. Only a sham arrangement used to deprive workers of their rights is not: "There is a huge distinction between bona fide and mala fide outsourcing" (para 11).
• Two of the workers appeared in person before the Supreme Court, and the company's petitions were dismissed with leave to appeal refused (paras 4 and 13).

Can a contract employee become permanent? The short answer

If you were hired through a contractor but the company really runs your work, the law can treat you as the company's own worker. In IFFCO Pakistan (Private) Limited v. Ghulam Murtaza (2024 SCMR 1548), decided on 4 April 2024, the Supreme Court left standing the findings of the labour commission and the Sindh High Court that such workers were the company's employees, free to join a trade union of their own choice.

The question is never only what the contract says. It is how the job actually works: whose sheet marks your attendance, whose account pays you, who approves your leave, whose machines and raw material you use, and whether your work is the company's everyday business.

Karachi: workers the company called contractors' men

The company refines, packs and sells cooking oil in Karachi. A group of its workers went to the National Industrial Relations Commission (NIRC) saying they had done work of a permanent nature there "for the past many years", "regularly and without any gap or break", yet were given no appointment letters, were kept out of the trade union and were denied annual increments, bonus, leave, medical cover and group insurance (2024 SCMR 1548, para 2).

The company said they were employed by three independent contractors (para 3). But the workers produced attendance and requisition sheets issued by the company, which it never rebutted; the three agreements, made in 2007, 2008 and 2009, "had already expired when presented in Court"; the High Court found they were "being paid from the account of the company"; and the contractors themselves never came forward to claim them (para 5). The NIRC single bench (9 November 2020), its full bench (13 September 2021) and the Sindh High Court (14 February 2023) all ruled for the workers (para 2).

What the Supreme Court decided in April 2024

A bench of Muhammad Ali Mazhar and Irfan Saadat Khan, JJ heard the company's petitions on 4 April 2024. Two of the workers appeared in person and argued that they had worked for years under the company's direct control, including the approval of their leave and the recording of their daily attendance (para 4). The company withdrew its petitions against 20 workers, and for the rest the petitions were dismissed and leave to appeal refused (para 13). The judgment, written by Muhammad Ali Mazhar, J, gives the reasons.

"There is no bar to contract out the whole job or in the bits and pieces to the outsource contractor", the Court said, "but what is crucial is that the outsourcing should not be used as a weapon of circumvention of labour laws by means of sham agreements". It added: "The alleged outsourcing arrangement cannot be allowed to be used as a device to deprive the workers of their legitimate rights envisaged under the labour laws" (para 11).

The test: whose worker are you?

The Court's yardstick is "the extent of control and supervision on human resource, ongoing control of independent contractor, if any, financial risks and obligations, as well as the provision of plant, machinery, and premises, and finally supply of raw material and allied set-up" (para 7). It also listed the usual questions: who is the appointing authority, who is the paymaster, who can dismiss, the extent of control and supervision, and the nature of the job and of the establishment (para 11).

Its summary of the law is plain: if the workers are in a department that is one of the company's main parts, the machines and raw material are the company's and its supervisors control the work, they are the company's employees; workers "engaged directly or through a contractor, would be deemed to be the employees of the company for whose benefit they perform functions"; and where a contract is "not genuine", "the so called contract employees will have to be treated as employee of the company" (para 11).

Workers: what to do

Keep proof that the company runs your work: attendance sheets, pay slips and bank transfers showing who pays you, leave approvals, gate passes, the company's uniform or card, and the names of the supervisors who direct you. In this case the company's attendance sheets and its own account were what the courts relied on (para 5).

Under the Industrial Relations Act 2012, a worker can bring a grievance about a right under any law to the employer in writing "within ninety days" of the day it arises; the employer must answer within fifteen days, and the worker can then take it to the Commission within sixty days (section 33). The Punjab Act gives three months, then the Labour Court within sixty days (section 33). Workers with the same grievance can apply together. A union or a labour lawyer can help you choose the right forum.

Companies: outsourcing that holds up

The Court did not ban outsourcing. A business may hand a job, or parts of it, to an outside contractor, including through toll manufacturing (paras 6 and 11). What it must not do is use a paper arrangement to dodge labour laws.

The warning signs from this case: contractor agreements that have expired while the same people keep working, the company paying and supervising the workers itself, and contractors who never step forward as the real employer (paras 5 and 11).

For law students and lawyers

The Court relied on Fauji Fertilizer Company Ltd. v. NIRC (2013 SCMR 1253), Abdul Ghafoor v. President, National Bank of Pakistan (2018 SCMR 157), State Oil Company Limited v. Bakht Siddique (2018 SCMR 1181) and Sui Southern Gas Company Limited v. Registrar of Trade Unions (2020 PLC 153), and on the factors listed in Nilgiri Coop. Mkt. Society Ltd. v. State of T.N. (AIR 2004 SC 1639), including the integration test (paras 9 and 11).

It also noted Pakistan's ratification of ILO Conventions 87 and 98 and the duties in section 91 and Schedule II of the IRA (para 10), and repeated that a High Court in its constitutional jurisdiction does not upset concurrent findings of fact that rest on the evidence (para 12).

The case at a glance

Facts

Workers at a Karachi oil company said they had done permanent work for years without a break but were treated as contractors' employees, kept out of the union and denied benefits. The company relied on three contractor agreements, all expired; the attendance sheets were the company's and the pay came from its own account. The NIRC single bench and full bench and the Sindh High Court held them to be the company's employees.

The question

Were workers supplied through contractors the company's own employees, with the rights of its workers?

What the Court held

Yes on these facts. The concurrent findings stood; the company's petitions were dismissed and leave to appeal was refused (paras 12 and 13).

Why

Outsourcing is lawful, but not as a sham to get around labour laws. The test is control and supervision, financial risk, plant, machinery and premises, and raw material; who appoints, pays and dismisses. Workers engaged directly or through a contractor are deemed employees of the company they work for (paras 7 and 11).

Limits

It does not make every contractor's worker the company's: it turns on evidence, which these workers had (para 5). Genuine outsourcing remains lawful (para 11). People employed mainly in managerial or administrative roles are outside the IRA's definition of worker (section 2(xxxiii)).

In the Court’s words

“the employees, engaged directly or through a contractor, would be deemed to be the employees of the company for whose benefit they perform functions”

2024 SCMR 1548, para 11

“all the agreements had already expired when presented in Court”

2024 SCMR 1548, para 5

The law it relies on

What this does not mean

• It does not mean every worker supplied by a contractor is automatically the company's. It turns on evidence of control, pay and the nature of the work, which these workers produced and the company never rebutted (para 5).
• It does not ban outsourcing. A genuine contractor who runs and pays its own staff is lawful (para 11).
• It does not cover people employed mainly in managerial or administrative roles, who fall outside the definition of worker (Industrial Relations Act 2012, section 2(xxxiii)).
• It does not set a fixed number of years. The workers here had served for many years without a break, but the test is how the work is controlled, not the calendar alone (paras 2, 7 and 11).

Questions people ask

Sources

• IFFCO Pakistan (Private) Limited v. Ghulam Murtaza and others, 2024 SCMR 1548 (Supreme Court of Pakistan, 4 April 2024), paras 2 to 5, 7, 11 to 13
  Workers supplied through contractors held to be the company's employees on evidence of its control, supervision and pay; outsourcing is lawful but cannot be a sham to circumvent labour laws; the company's petitions dismissed and leave refused. verified against full text
• Industrial Relations Act, 2012, Sections 2(xxxiii) and 33 text checked in FAI Statute Search, 27 October 2026
• Punjab Industrial Relations Act, 2010, Sections 2(xxxi) and 33 text checked in FAI Statute Search, 27 October 2026

Every quote and section above is traced to the full judgment or statute text by an automatic check that runs on every update.

What the reel says