THOSE who receive pension from the Employees Old-Age Benefits Institution (EOBI) are wondering why the monthly amount has not been increased through the central budget for 2021–2022. The answer is that any amendments in the labour laws cannot be carried out through the Finance Act.

In this respect, a two-judge bench of the Sindh High Court had, through its judgement of Feb 26, 2011, nullified the amendments effected by the government in five labour laws through the Finance Act, 2007. According to the court, the amendments did not fall within the ambit of the money bill and therefore should have been passed by both Houses of parliament.

In 2007, the government had increased the minimum wages of workers (effective from July 1) from Rs4,000 to Rs4,600 per month, under the West Pakistan Unskilled Workers Wages Ordinance, 1969. As the monthly contribution payable to EOBI by employees and employers was linked to the minimum wages under the ordinance, employers started paying the contribution at the enhanced rate.

At the same time, the monthly EOBI pension was also increased from Rs1,300 to Rs1,500 per month effective from July 1, 2007. These increases in minimum wages and under the EOB Act were also set aside by the said judgement of the Sindh High Court. However, as workers and pensioners had continued to receive these increases for around four years, these were not reduced in pursuance of the judgement by employers and the EOBI.

The centre and provinces must find a solution to the pensions issue.

Prior to the 18th Amendment in April 2010, the EOBI would increase pension whenever there was an increase in its monthly contribution paid by the employers. As the labour laws were devolved to the provinces through the 18th Amendment and the Concurrent List in the Constitution was abolished, the federal government was left with no power to make any new laws nor to effect amendm­ents to the existing ones for the entire country.

In 2005, the following amendment relating to the definition of wages was carried out in the EOB Act: “‘wages’ mean the rates of wages as declared under the Minimum Wages for Unskilled Workers Ordinance, 1969.” Even after devolution, the EOBI continues to be administered at the federal level but it cannot lawfully increase the amount of monthly contribution, which remains at six per cent of Rs8,000 per insured employee.

Facing this issue, the PML-N government had amended the ordinance of 1969 in 2015, fixing the minimum wages at Rs13,000 per month. This amendment was challenged by some employers in Pakistan in their respective high courts. The high courts’ judgment went in the employers’ favour based on the reasoning mentioned. Since then, employers have been paying a monthly contribution at different rates at their will, ranging from 6pc of Rs8,000 to 6pc of Rs13,000 per month and the EOBI is unable to initiate any remedial measures on account of the 18th Amendment.

Based on its authority vested in the 18th Amendment, the Sindh government has pas­sed the Sindh Employees Old-Age Benefits Act, 2014. However, no funds have been transferred to the Sindh government by the federal government nor has the former for­m­­ed any institution to run the scheme. Never­theless, around 100 Sindh-based companies are not paying any contribution to the federally operated EOBI, due to the apprehension that the provincial government might later claim it from them with retrospective effect.

Initially, the am­­ount of mon­thly pension was fixed at Rs75 per month when the the Employees Old-Age Benefits Act was promulgated in 1976. Over the last 12 years, it has been increased six times, the latest from Rs6,500 to Rs8,500 per month in January 2020.

A large number of people from upcountry and the northern areas come for jobs to Lahore or Karachi besides other major towns. When they go back to their hometowns or villages after retirement, it is far more convenient for a federal institution to process and disburse their pensions. It is therefore imperative that operation of the pension scheme continues to be managed by the federal government.

In the current state of limbo, the federal government is not empowered either to increase the amount of the EOBI’s rate of monthly pension nor the amount of contribution. The EOBI has not made another attempt after 2015 to increase the rate of contribution as the employers don’t let it do so. However, the government has been increasing the amo­unt of pension and no one objected as the beneficiaries are mostly poor retired workers.

If this dilemma is allowed to fester 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, which is currently more than 600,000. The centre and the provinces need to cooperate with each other in order to find a solution to this grievous issue and avoid discontinuation of a wonderful scheme.

The writer is a consultant in employee relations at AKUH and teaches labour welfare laws at IBA.

Published in Dawn, July 10th, 2021