WPPF: A Statutory Right Still Waiting for Full Enforcement

What Is WPPF?

The Workers’ Profit Participation Fund (WPPF) is a labor-law mechanism that requires eligible companies to share a portion of their net profits with employees. Its primary objectives are to improve workers’ welfare, enhance productivity, promote industrial harmony, and enable employees to share in the financial success of the enterprise. In Bangladesh, the WPPF is currently governed by the Labor Act, 2006. Similar statutory profit-sharing schemes exist in several other jurisdictions under different names, commonly referred to as profit-sharing laws.

Early History

The concept of workers sharing in the profits of an enterprise originated in Europe during the nineteenth century. One of the earliest and most influential examples was Maison Leclaire, a house-painting company in Paris founded by Edmé-Jean Leclaire. In 1842, Leclaire introduced what is widely regarded as the first formal profit-sharing scheme after observing that employees working solely for wages had little incentive to reduce waste or improve the quality of their work. His initiative demonstrated that allowing workers to participate in the financial success of the business could increase both efficiency and commitment.

The idea gained broader international recognition after the Second World War, when governments sought new mechanisms to improve labor-management relations, increase productivity, and reduce income inequality. France became one of the first countries to make employee profit-sharing a statutory requirement. In 1967, under the presidency of Charles de Gaulle, France enacted legislation requiring large companies to establish mandatory profit-sharing schemes. Prior to that, voluntary profit-sharing arrangements had existed in countries such as the United Kingdom and the United States, but they were not legally compulsory.

Only a year later, Pakistan enacted the Companies’ Profits (Workers’ Participation) Act, 1968, making it one of the earliest countries in Asia to introduce a mandatory statutory profit-sharing system. The modern legal concept of profit-sharing has also been encouraged internationally by the International Labor Organization (ILO), which has promoted policies enabling workers to receive a fair share of enterprise profits while maintaining business competitiveness and social justice.

WPPF in Bangladesh

As Bangladesh was part of Pakistan until 1971, it inherited the legal framework established by the Companies’ Profits (Workers’ Participation) Act, 1968. Following independence, Bangladesh incorporated and expanded the concept through the Bangladesh Labor Act, 2006.

Under the Labor Act, eligible companies are required to contribute 5% of their net profits to three statutory funds within nine months from the close of the accounting year. The distribution is made in the following ratio:

• 80% to the Workers’ Profit Participation Fund (WPPF);

• 10% to the Workers’ Welfare Fund; and

• 10% to the Bangladesh Workers’ Welfare Foundation Fund.

However, this obligation applies only to establishments where the paid-up capital is at least Tk. 1 crore or the permanent assets are valued at Tk. 2 crore or more. The law also provides certain exemptions for 100% export-oriented industries and 100% foreign-owned establishments, subject to the conditions prescribed by law.

In practice, however, the exemption relating to “100% export-oriented or foreign-invested sectors” has frequently been misinterpreted. Many companies that are only partially foreign-owned have attempted to avoid their statutory obligation to establish a WPPF by claiming exemption, despite not satisfying the legal requirements. Numerous disputes have arisen from such incorrect interpretations.

WPPF and Banking Companies

Bangladesh inherited one of the earliest statutory profit-sharing frameworks in the region. Ironically, however, the enactment of the Bank Companies Act, 1991 significantly limited the application of this important labor right within the banking sector.

Section 11 of the Bank Companies Act provides that a banking company shall not enter into any arrangement under which employees receive a share of the bank’s profits. Although the provision has been interpreted in different ways, its practical effect has been that employees of banking companies have generally been treated as ineligible to receive benefits under the WPPF.

One of the possible explanations is that the legislature intended to prevent directors or senior management from being influenced by profit-sharing arrangements when discharging their fiduciary responsibilities. Nevertheless, extending this restriction to all categories of bank employees arguably defeats the very objective of statutory profit participation and excludes thousands of workers from a benefit available in other sectors.

The 2017 Bangladesh Bank Circular

The situation became even more controversial on Valentine’s Day of 2017, when Bangladesh Bank issued an anti-Valentine’s Circular No. 53.00.0000.311.22.002.17-130 following a direction reportedly given by the then Finance Minister. The circular stated that banks and financial institutions should remain outside the scope of the Labor Act and that the WPPF should not apply to their employees.

The legality of this directive has been widely questioned. Under Bangladesh’s constitutional framework, neither a minister nor even the Prime Minister has the authority to interpret or suspend the operation of an existing law. Parliament may enact or amend legislation, but the authoritative interpretation of statutes belongs to the judiciary.

Consequently, directing regulatory authorities not to implement an existing law raises serious concerns regarding the rule of law, the separation of powers, and constitutional governance. Administrative instructions cannot override statutory rights created by Parliament.

Judicial Recognition of Employees’ Rights

Despite the inaction of the Department of Inspection for Factories and Establishments and the Bangladesh Labor Welfare Foundation in many instances, the judiciary has played a significant role in protecting employees’ rights.

Through writ petitions before the Hon’ble High Court Division and industrial disputes before the Labor Courts, employees have successfully asserted their entitlement to WPPF benefits. In several cases, multinational companies and banking institutions entered into a Memorandum of Settlement with employees in order to resolve litigation and withdraw pending writ petitions. In other cases, the Hon’ble High Court Division directed employers to pay the statutory WPPF benefits in accordance with the law.

These judicial interventions demonstrate that statutory profit-sharing rights are enforceable and cannot simply be ignored through administrative practice or executive directions.

Conclusion

The story of Edmé-Jean Leclaire remains instructive even today. In 1842, there was no statute compelling him to share his company’s profits with employees. There were no established legal principles, no regulatory requirements, and no judicial precedents. He introduced profit-sharing solely because he believed it was fair and beneficial for both workers and the enterprise.

Today, the situation is very different. Bangladesh has a comprehensive statutory framework governing the Workers’ Profit Participation Fund. The law exists, the rules are settled, and the courts have repeatedly affirmed employees’ rights. Yet many workers continue to be denied their lawful entitlement, forcing them to seek judicial intervention time and again.

The question therefore is not whether the law recognizes WPPF; it clearly does. The more important question is why workers should have to approach the High Court repeatedly to obtain a benefit that Parliament has already guaranteed. A statutory right should not depend upon prolonged litigation. Effective enforcement by regulatory authorities is essential if the objectives of the Workers’ Profit Participation Fund are to be realized in both letter and spirit.

Author : Md. Rawsan Zadid, Senior Associate, MNP Legal, Advocate, Supreme Court of Bangladesh.