THE Employees Old-Age Benefits Act, 1976 was promulgated with a view to providing benefits to those employed in industrial, commercial and other organisations. At present, it is applicable to establishments employing five or more persons. Employers have to pay a monthly contribution to the Employees Old-Age Benefits Institution (EOBI), which is responsible for the administration and management of the scheme.

Besides granting old-age pension to eligible women (55 years and above) and men (60 years and above), the institution also gives old-age allowance, old-age grants, survivors’ pension and invalidity pension. Pensions other than old-age pension, is payable in special circumstances. The genuineness of each case is determined by EOBI.

The existing rate of monthly contributions paid by the employers to the institution for each insured employee is 6pc. Five per cent of the amount is paid by the employer and 1pc by the employee. These percentages are linked to the current rate of minimum wage fixed under the Minimum Wages for Unskilled Workers Ordinance, 1969. Prior to 2005, contribution percentages were calculated in accordance with a fixed amount but the system was changed by the Finance Act, 2005.

The monthly rate of pension started from Rs75 and is now Rs5,250. It would have been much higher had EOBI not been plagued by two major scams involving the embezzlement of millions of rupees and had the federal government acted conscientiously in managing the scheme. The formula devised for calculating the rate of pension according to the tenure of service of the pensioner is given in the schedule to the act, but its validity has eroded. The formula is: monthly wages multiplied by the number of years of insurable employment divided by 50.

This pension scheme functioned smoothly until the devolution of labour laws through the 18th Amendment in 2010. Unfortunately, it has gone haywire since. The federal government has so far retained unofficial management of the scheme, but contrary to its wishes, Sindh has enacted its own Sindh Employees Old-Age Benefits Act, 2014.

Pensioners are bearing the brunt of the row between EOBI and employers.

Prior to devolution, the minimum wage was increased under the Minimum Wages for Unskilled Workers Ordinance, 1969 — the last increase to Rs6,000 was made in July 2008. After devolution, the provinces increased minimum wage under the Minimum Wages Ordinance, 1961, from July 2012 to Rs8,000, July 2013 to Rs10,000, July 2014 to Rs12,000 and July 2015 to Rs13,000 per month.

Some progressive employers started paying contributions at 6pc of the minimum wage without being asked to do so by EOBI. However, most employers continued to pay contributions of either Rs6,000 or Rs8,000 per month. Employers who increased their rate of contribution to Rs8,000 had complied with the written directions of EOBI.

Recently, the federal government amended the Ordinance of 1969 by increasing the minimum wage with retrospective effect in order to help EOBI claim the arrears. Soon after, EOBI issued notices to registered employers in Pakistan to increase their contributions accordingly. Aggrieved by these notices, groups of employers in Lahore, Multan and Karachi approached the high courts of Lahore and Sindh obtaining stay orders, which have been validly granted as after devolution the federal government is competent to make amendments in the ordinance of 1969 only for Islamabad Capital Territory.

In view of these legal intricacies, various employers are paying EOBI contributions at different rates of Rs6,000, Rs8,000 and Rs3,000 per month, and EOBI is calculating monthly pensions at Rs8,000 to the detriment of employees with exceptionally long service, who get almost the same pension of Rs5,250 as the others who have worked for shorter duration.

Caught in between the EOBI and employer crisis are the pensioners who have to bear the brunt. In an attempt to find a solution, a tripartite national seminar represented by leaders of workers’ federations and representatives of employers and the government was arranged by the Pakistan Workers Training and Education Trust about two weeks ago. All stakeholders present were unanimous in their view that the pension scheme was a social insurance plan and not a law. Since this is the state’s responsibility under Article 38 (C) of the Constitution, the same cannot be devolved to the provinces.

The constitutional article mentioned above relates to the promotion of social and economic well-being of the people, and prescribes that “the state shall provide for all persons employed in the service of Pakistan or otherwise, social security by compulsory social insurance or other means”.

The federal government should therefore immediately bring the pension scheme back to its fold.

The writer is an industrial relations professional.

Published in Dawn, April 28th, 2016