THE Employees’ Old-Age Benefits Act, 1976, is one of the finest labour welfare laws promulgated in Pakistan. It was enacted and enforced towards the fag end of Zulfikar Ali Bhutto’s government, which was a fulfillment of his election manifesto that talked about ameliorating the lot of the workers.

A pension scheme for the retired workers of industry and establishment was introduced for the first time. Prior to July 2001, the entire monthly contribution on behalf of the insured employees was handed over to the Employees’ Old-Age Benefits Institution (EOBI) by the employers. Since then, the employees also have to pay their share of the contribution along with that of the employers.

In 2005, an amendment was made to the relevant Act, whereby the term ‘wages’ was defined as the rate of wage as declared under the Minimum Wages for Unskilled Workers Ordinance, 1969. At that time, the minimum wage under the said ordinance was Rs3,000. Therefore, an employee would pay one per cent of this amount towards his share of the contribution, and the employer would pay the remaining 5pc. This would make a total of Rs180pm per insured employee.

Thereafter, the minimum wage under the relevant ordinance was fixed at Rs4,000 in 2006, Rs4,600 in 2007 and Rs6,000 in 2008. The EOBI kept running smoothly till April 2010, when the labour laws were devolved to the provinces under the 18th Amendment. However, the federal government kept managing the scheme after the devolution and did not transfer it to the provinces.

As the 1969 ordinance was a federal law, any amendment to it carried out by the federal government would only be applicable to the Islamabad Capital Territory (ICT) and would not extend to the provinces.

In 2015, the federal government effected an amendment in the ordinance and fixed the minimum wage at Rs13,000. The EOBI’s demand on employers to pay the contribution at 6pc of Rs13,000 was challenged by the latter in the courts.

The high courts in Lahore and Peshawar gave judgments in favour of the employers, holding that the EOBI had no authority to claim contribution at this rate.

Despite the court judgments, the EOBI displayed the amount of Rs13,000 on its portal, but a large number of employers did not pay the contribution at that rate. On its part, the EOBI could not take action against such employers.

The EOBI has now changed the amount of Rs13,000 to Rs25,000 on its portal, which will almost double the rate of contribution, from Rs780 to Rs1,500pm per insured employee. The EOBI is now forcing the employers to pay contribution at 6pc of the Rs25,000. This situation is similar to the one faced by the employers in 2015.

To make the demand of EOBI lawful, the federal government has two options: (a) carry out a constitutional amendment to bring back the EOB Act within its fold, or (b) devolve the scheme to provinces that may fix their own minimum wage at which the EOBI contribution would be payable.

Besides, it is quite unfair on the part of the EOBI to increase the amount of monthly contribution payable by the employers and the employees by around 92pc in one go. The increase should not be more than 20pc, especially when after 46 years of the scheme’s induction, the EOBI is paying a paltry amount of Rs8,500 as monthly pension to the retired employees.

Parvez Rahim
Karachi

Published in Dawn, November 26th, 2022