EOBI pension anomaly

12 Jul 2020


ON July 1, 2020, the cabinet approved an increase in the monthly pension disbursed by the Employees’ Old-age Benefits Institution from Rs 6,500 to Rs 8,500. The pensioners had already been paid at the Rs 8,500 revised rate from January to March. However from April it was reverted to the previous rate of Rs 6,500 because of legal lacunae, which has now been removed.

Over the last 12 years, the EOBI pension has been increased six times. The latest raise from Rs 6,500 to Rs 8,500 in Jan 2020.

The EOBI pension started in 1976 with a paltry amount of Rs 75 per month when the act was promulgated.

Before the 18th amendment in April 2010, increases in EOBI pension were given whenever there was an increase in monthly contribution paid to the EOBI by the employers, one per cent of which amount is contributed by the respective insured employees. Thereafter, the matter of increase in the employer/employee contribution has been confronted with a malicious anomaly which the federal government, currently operating the scheme, is finding difficult to remove.

According to an amendment in the act carried out in 2005, the percentage of EOBI contribution was linked to the minimum wage as fixed under the West Pakistan Minimum Wages for Unskilled Workers Ordinance, 1969, a federal law.

Faced with the issue, the PML-N government made an amendment in the act of 1969 in 2015, fixing the minimum wage at Rs 13,000 p.m. This amendment was challenged by employers all over Pakistan in the respective high courts. The high courts’ judgment was in the employers’ favour stating that jurisdiction of the federal government to enforce its laws, extended only to Islamabad Capital Territory and not to the rest of Pakistan.

Since then the employers are paying the monthly contribution at different rates at their will, ranging from six per cent of Rs 8,000 to six pc of Rs 13,000 p.m. and the EOBI is unable to initiate any remedial measures on account of the 18th amendment. Some of the employers are not paying any contribution to EOBI for more than five years.

If this dilemma is allowed to fester unhindered for another two to three years, the EOBI’s funds will be depleted to an extent that it will no longer be possible for it to disburse pensions to the ever increasing number of pensioners. The Centre and federating units need to address this issue quickly.

A Pensioner

Published in Dawn, July 12th, 2020