WITH the growth of business and industry in Pakistan during the 1960s, a need was felt to improve the workers’ living conditions. A social security scheme was introduced to provide benefits to certain employees of industries or establishments or their dependents in the event of sickness, maternity, employment injury or death. It was followed by the Companies Profits (Workers’ Participation) Act, 1968.

Before the promulgation of the Employees’ Old-age Benefits Act, 1976, three more welfare laws for workers comprising the welfare fund, 1971, children’s education, 1972, and cost of living relief, 1973, were enacted. (It was for the first time here that a law allowing pension to retired employees of industrial, commercial and other organisations was enforced.)

The best three among the above-mentioned laws, ie social security covering medical treatment, pension, and workers’ profit participation, worked well till their devolution to the provinces through the 18th Amendment in 2010. Since then, government institutions and the revenue board responsible for managing welfare schemes under the three laws have been involved in intense litigation with the employers.

The administration of social security and workers’ profits participation schemes have stabilised to some extent. However, EOBI continues to face enormous challenges.

EOBI continues to face enormous challenges.

While all the other labour laws have been devolved to the provinces, the federal government has retained the management of the pension scheme. The motive behind this was to facilitate the smooth transition of workers — in terms of EOBI pension — who had spent their working life in big cities and on retirement returned to their native places in other provinces. Realistically, the EOB Act is no longer a labour law, as after an amendment in 1994, it is applicable to both management and non-management employees of an establishment except for the directors.

After devolution, the federal government is no longer empowered to make any amendments in the EOB Act, and so doesn’t have the legal authority to either raise the amount of monthly pension or the contribution payable by employers. Whenever the EOBI tries to raise the contribution amount, the employers challenge it in the superior courts and get a favourable verdict. As a result, the employers have been paying contributions according to their own will; in most cases, the amount ranges from six per cent of Rs8,000 to 6pc of Rs13,000 per insured employee. Out of the 6pc, 1pc is borne by the employee on whose behalf the remaining 5pc contribution is paid by the employer.

Recently, the EOBI increased the amount of contribution on its online portal from 6pc of Rs13,000 to Rs25,000, which is the existing minimum wage of unskilled workers. Over 50 employers have challenged this increase before the Sindh High Court through the Employers’ Federation of Pakistan.

If the federal government wishes to retain the management of the scheme, it should be through a simple majority vote in the National Assembly. Such action would end the controversy lingering for the last 13 years.

Similar issues were being confronted by the workers’ profit-sharing scheme, but they have been partially resolved. Sindh had promulgated the Sindh Companies Profits (Workers’ Participation) Act, 2015. However, the other provinces were reluctant to promulgate their own acts and wan­ted the scheme to go back to the centre.

The bulk of the amount contributed by the companies under the 1968 Act had been going to a fund established under the Workers’ Welfare Fund Ordinance, 1971. The centre would then proportionately distribute the amount collected to the respective provinces for workers’ welfare.

Fearing reduced funds because of fewer industries, KP and Balochistan had not promulgated their own laws on the matter. Since the federal government did not come to their rescue, Balochistan promulgated its own Act in 2022. Similarly, Punjab, which had been supporting the cause of the two provinces, has also enforced the Punjab Companies Profits (Workers’ Participation) (Amendment) Act 2021.

If KP also promulgates its own law, the only segment left will be the workers of trans-provincial companies. These companies have establishments in more than one province and are governed by federal laws. As the federal Act of 1968 has not been amended since the time of devolution, it has become redundant.

The law as it stands today is applicable to workers drawing a monthly salary of up to Rs5,000, while the existing minimum wage is Rs25,000. The federal government should amend the Act on a priority basis so that workers of trans-provincial companies are not deprived of their due share in profit.

The writer is a consultant in human resources at the Aga Khan University Hospital.

Published in Dawn, January 21st, 2023