Employees' Old Age Benefits
Social Security in Perspective
By SYED SAAD HUSSAIN
Dec 25 - 31, 2000
Social security with respect to the schemes covered
by Employees' Old Age Benefits Institution (E.O.B.I.) was the point of
study in a 'session for Business & Labour Laws at the Institute of
Business Administration, Karachi. The session was conducted by Mr. M.
Kamil Shahbazker, Ex-Country Manager, Philips Pakistan.
Mr. Shafiq-ur-Rehman Sheikh, Director E.O.B.I., was
the speaker on the occasion. He emphasised on the need for increasing
awareness about the scheme offered by E.O.B.I. Mr. Shafiq also revealed
that E.O.B.I. is one of the very few profitable government organizations
in Pakistan and that the model of E.O.B.I. should also be followed by
other government firms. Some of the main points of the discussions were
Tittle of Law- Employees' Old Age Benefits Act
1976 (Act No. XIV of 1976)
Promulgation Date- This law was promulgated on
April 8th, 1976 as EOB Act.
Coverage- The EOB Act covers all industrial,
commercial and other organizations which employ 10 or more persons.
Exemption from coverage: Employees in the service
of the state, statuary bodies, police force, armed forces, railways,
local bodies, municipal committees and other local authorities are
exempted from the EOB Act.
Who pays the contribution:
Only employers pay the
contributions on behalf of their employees. These employers may
represent national or multinational organizations. As far as the
government employees are concerned, the government itself paid
contribution to the institution. This exercise continued from 1986 to
1995. In 1995 the government withdrew its contributions towards the
Rate of contribution: The rate to be paid to the
institution is Five (5%) per cent of the wages/salary upto the limit of
Rs. 3000/-. In the initial Act of 1976, the wages ceiling on which EOB
contribution was payable was Rs. 1000/- which was raised to Rs. 1500/-
in 1985 and Rs. 3000/- in 1993 respectively. Thus presently the maximum
amount of contribution payable is Rs. 150/- per insured person for the
wage/salary of Rs. 3000 and above.
Benefits: There are four benefits available under
the Act which are as follows: •Old-Age Pension. •Old-Age Grant. •Survivors'
Pension. •Invalidity Pension
Old-Age pension is payable at the age of 60 years for
males and 55 years for women. It is relaxed upto five years in case of
persons in employment in the occupation of mining for at least ten years
immediately proceeding retirement.
Requirement for pension: The requirements for
receiving pension have been classified under three options. These are:
A person should have 15 years of insurable employment
if he enters the EOB Scheme before the age of 40 years;
A person should have 7 years of insurable employment
if he enters the EOB Scheme between 40-45 years of age;
A person should have 5 years of insurable employment
if he enters the EOB Scheme at the age of 45 or above.
Calculation of amount of benefit
The calculation of pension for an insured person is
based on a number of factors. Therefore E.O.B.I has defined a formula
for calculation of Old-Age Pension which takes into account all the
necessary factors. This formula is as under: (Average monthly wage *No.
of insurable employment years)/50
Here the average monthly wage is calculated on the
basis of the wages earned over the last twelve months. Also six months
or more will be taken as one full year of insurable employment.
A minimum level of old-age pension is maintained.
Presently the minimum pension is Rs. 630/-. If an insured person whose
amount of old-age pension is calculated according to the above formula
falls short of the minimum pension amount, then he or she will be
awarded the minimum pension amount.
Reduced Old-Age pension: Reduced old age pension
is payable to the insured persons working in an establishment, which
maintains superannuating age less than 60 years but not less than 55
years (55 years in case of woman) which has to be established through
Calculation of reduced old-age pension:
old-age pension is reduced by one-half per cent of the old-age pension
specified in the schedule for each completed month by which the age
falls short of 60 years (55 years for woman). The minimum old-age
pension is also reduced in the aforesaid manner.
The reduced old-age pension is for life and is not
restored when the insured person attains the normal pension age of 60
Invalidity pension is payable to that insured person
whose normal earnings have dropped to one third due to any
incapacitation. The other conditions in this regard are that the degree
of invalidity is two third and;
•Contribution in respect of him is payable for 15
years. However, if the insured person has less than 15 years of
insurable employment to his credit but not less than 5 years and
contributions are payable for not less than three years during the five
years preceding immediately his sustainability of invalidity.
•Invalidity pension is not payable retroactively
for more than six months
•Invalidity pension is renewed after six months on
the medical report. If degree of invalidity remains more than two third,
the pension is continued. If invalidity pension is allowed continuously
to the insured person for five years then he becomes entitled to
invalidity pension for life.
•Invalidity pension commences from the following
month that in which insured person satisfies the condition for
•Invalidity pension will be calculated according to
the formula for old-age pension. Minimum pension is anyhow payable to
him even if the formula gives an amount which is less than the minimum
The requirement for survivor's is as follows:
If the old-age or invalidity pension holder dies, the
same amount of pension is allowed to the surviving spouse of the
deceased pensioner, and there is no discontinuity of pension as such. It
is just treated as a conversion case. The old-age or invalidity pension
is converted to survivor's pension.
If an insured person dies while in insurable
employment and contribution in respect of him is a payable for at least
three years on if an insured person dies while not in insurable
employment and contributions in respect of him/her are payable for at
least five years, minimum pension would be allowed to the surviving
The survivor's pension will commence from the month
following the insured person's death.
Pension to the Children: If the deceased
pensioner is not survived by a spouse, survivor pension will be allowed
to his minor children and will be distributed among them equally. The
pension is payable up to the age of 18 years to a male child and to the
female child till she attains the age of 18 years or her marriage,
whichever is earlier.
Pension to Parents: If the deceased pensioner is
neither survived by a spouse nor by children, the pension will be paid
to the parents of the deceased pensioner for a period of five years.
Old-age grant is allowed to that insured person who
is not otherwise entitled to old-age pension. Old-age grant is approved
to that insured person who has attained the age of 60 (55 in the case of
women) years and has at least two years of insurable employment to his
Calculation of Old-age grant: Old-Age grant is
payable in lumpsum @ one month's average wages for each completed year
(average wage is to be calculated on the basis of wages on which
contribution was payable in respect of twelve calendar months) of
insurable employment. A period of six months or more will be treated as
Registration of employers:
As per law, it is the
responsibility of the employer to get his establishment registered with
EOBI. However the field force of the institution also persuades the
employers who employ ten or more persons to register themselves with the
institution and to fulfil other liabilities as provided by the law.
Registration of employees:
Again it is the legal
responsibility of the employer to register his employees with the
Institution. However the institution persuades the employers to register
their employees and issues registration cards to the employees. However
the employees can also apply for registration if he is not registered by
The principle of "Once Covered, Ever
Covered": The Institution follows the principle of once covered
ever covered for both employees and employers. If an establishment
employs ten or more persons and it is registered with the Institution
then even if the number of persons reduces to one it will have to fulfil
his liabilities in respect of that employee.
A similar case is with the employees except that they
have to work in a registerable establishment so that their service may
be treated as insurable employment under the EOB Act.
Continuity of insurable employment: Continuity of
insurable employment is not necessary to claim EOB benefits. The service
of an insured person with registered establishments is considered for
calculation of insurable employment while his services with the
unregistered establishments would be left out.
Contribution can be deposited only with the banks:
The employers are to deposit contributions only in the HBL authorized
branches. Likewise the EOBI pensioners can derive pensions only from
that HBL branch which has been allowed to them as per their pension
card. The offices of the Institution are not allowed to receive any
contribution or disburse and pension.
The other members who organized the session were: •Ahmed
Ali Siddiqui, •Nasir Hussain Khadim, •Imran Majid.