June 13, 2006	Tuesday	Jumadi-ul-Awwal 16, 1427

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ISLAMABAD, June 12: Tens of thousands of employees would be deprived of pensions as a result of a budget proposal that seeks to restrict the scope of the employees’ old-age benefits scheme to industries with a minimum of 20 workers instead of the existing 10.

The government has proposed that industries and establishments set up from July 1, would join the Employees Old- Age Benefits Institution (EOBI) scheme only if they have a strength of at least 20 employees. The proposal is set to deprive tens of thousands of people of pension besides restricting the EOBI’s scope, which at present covers only four per cent of the country’s labour force.

The cost of EOBI pension does not fall on the government. The cost is met from an EOBI fund, which is established by contributions from employers and employees. At present, employers contribute Rs180 per month while Rs30 is deducted every month from the employees’ salary. The contributions plus investment income on the EOBI fund are used to pay for the employees’ pensions.

“If the proposal is implemented, it would be a straight loss for the employees and benefit the employers. Employers would gain exactly what their employees would lose: a straight transfer from the poor to the rich, a zero-sum game favouring the rich,” a social security expert told Dawn.

He said that the proposal should be dropped altogether.

The EOBI pensions are modest and aimed at subsistence. Employees are awarded these pensions at the age of 60, if they contribute for 40 years. The monthly pension is 80 per cent of the minimum wage. The monthly pensions amount is Rs2,400 against a minmum wage of Rs3,000. In practise, the average contribution period is 20 years and the pension is 40 per cent of the minimum monthly wage i.e Rs1,200 per month. But, there is also a minimum pension; at present Rs1,000 per month.

At present, only 225,000 people are getting EOBI pensions, including 25,000 widows.

The budget proposal is not only contrary to the government’s poverty reduction programme but also the earlier proposals of a number of commissions which wanted the EOBI’s coverage to be extended to arrest poverty among personers and widows.

In 1993 report of the Commission on Social Security had recommended the extension of the scheme to larger population in general terms, but had not proposed any specific timetable.

In April 1994 and November 1996 the task forces on social security had recommended specific timetables for extension in the coverage of the scheme. The task forces had recommended that the threshold of the existing 10 employees be lowered to five, then 0 - ? to two and then removing the threshold altogether.

The task forces were of the view that the government had extended the EOBI’s coverage to organisations with 5-9 employees in 1994-95, an additional half a million employees would have been benefited from the scheme. According to the 1996-97 figures, if EOBI had been allowed to register organisation with 2-4 employees, it would have enrolled some 1.15 million extra employees.