The Plight of EOBI!
by: Israr Ayoubi
Ex. PRO, EOBI
Founder Social Safety Net, Pakistan
The Employees’ Old-Age Benefits Institution (EOBI) is the Social Insurance Institution of Pakistan. It operates under the control of the Ministry of Overseas Pakistanis and Human Resource Development, Government of Pakistan. It came into formation on 1st July 1976, through the Employees’ Old-Age Benefits Act 1976 by the Parliament of Pakistan.
EOBI provides the following benefits to its registered employees (Insured Persons) or its survivors. An Insured Person (IP) typically becomes eligible to get Pension after reaching the age of 60 and completing 15 years of insured service with paid monthly Contribution.
Old-Age Pension: This Pension is provided in an event of the retirement of an Insured Person.
Survivors’ Pension: This Pension is provided to the nominees of the Insured Person/Pensioner in event of his death.
Invalidity Pension: This Pension is provided in case of disability of the Insured Person.
Old-Age Grant: These lump sum Grants are given to those Insured Persons who have attained the superannuation age but do not meet the minimum threshold for pension.
The word Pension is derived from the Latin word “pensio” which means “payment” and is a retirement fund for retired, widowed, or disabled persons regularly received from the State or a former Employer. Pension is also called a reward for employment.
The rights of older persons to social security and to an adequate standard of living to support their health and well-being, including medical care and necessary social services, are laid down in the major international human rights instrument, the Universal Declaration of Human Rights (UDHR),1948, and International Covenant on Economic, Social and Cultural Rights (ICECSR),1966. The content of these rights is further specified in the normative body of standards developed by the ILO, which provide concrete guidance to countries for giving effect to the right of the older person to social security, from basic levels to full realization.
There are three types of pension systems in use around the world, Contributory, Non-Contributory, and State Administered Pension system. Pakistan has a Contributory Pension Scheme to protect registered employees and their nominated survivors. To achieve the objective of Article 38 (c) of the Constitution of the Islamic Republic of Pakistan, the Parliament has passed EOBI Act 1976 to provide Compulsory Social Insurance to private-sector employees in the shape of Old-Age Pension, Survivor’s Pension, Invalidity Pension, and Old-Age Grant.
The Employees’ Old-Age Benefits Act 1976 was enforced from 1st July 1976, extended to the whole of Pakistan and applies to every industry, establishment or other organization, where ten (10) or more persons are employed directly or indirectly by the employer or such number were so employed on any one day during the preceding twelve (12) months at the time the Act becomes into force, irrespective that the number of persons employed may reduce to less than ten (10) after the application of this Act.
The Plight of EOBI!
The main purpose of the Employees’ Old-Age Benefits Act 1976 is to give an additional benefit to the employees, workers and labours to protect them from the hardship of old-age when they are no longer fit to work.EOBI’s policy-making body is a 16-member tripartite Board of Trustees (BoT).
consisted the three officials of Federal Government, four officials of Provincial Governments and a nominated representative of the Employers and Employees of the four Provinces. The Federal Secretary of Ministry of OP&HRD is also the President of the EOBI Board of Trustees.The present BoT was constituted on 6 November 2013 for the term of two year. but it is still illegally in functioning, the Federal Government has failed to nominate the new members for the BoT.
EOBI is a statutory body and a Trust Institution and all of its employees are the Trustees of the Pension Fund Trust, that is why the Government of Pakistan has declared EOBI exempted from Income Tax. EOBI does not receive any financial assistance from the Government for carrying out its Operations, only monthly Contribution received from the registered Employers and Insured Persons (IPs) is the sole income of the Institution.
EOBI main functions are to Identification and Registration of Establishment, Industries and other organizations, Identification and Registration of employees, Collection of monthly Contribution from registered Employers and Insured Persons, management of Employees’ Old-Age Benefits (EOB) Pension fund, investment of funds in Govt. Securities, Equity and Real Estate and provision of Benefits to its Insured Persons as per Laws. The primary responsibility of EOBI is to provide Pension benefits to the retired Insured Persons and their survivors and they should be treated with respect and dignity.
EOB Scheme is a Contributory Pension Scheme and EOB Act 1976 is applicable to all category of employees, workers and labours like permanent, temporary, daily wages, contractual, badli, seasonal and apprentices, serving in any private sector Employers, Organization or through any contractors.
A monthly Contribution equal to 6% of current Minimum Wages (Employer share is 5% and Insured Person share is 1%) has to be paid by the Employers of all the registered industrial, commercial and other organizations for their Insured Persons. According to EOB Act 1976 EOBI monthly Contribution @ 6% has been linked with the current Minimum Wage. The Federal Government has recently fixed Minimum Wage of Rs.25,000, by which EOBI current 6% monthly Contribution becomes amount of Rs.1500 p.m. for each Insured Person.
The Plight of EOBI!
The employees registered with EOBI are called Insured Person (IP). The age of eligibility for EOBI Pension is fixed at 60 years for male IPs, while in case of women and Mine workers (IPs), the age limit is fixed at 55 years with a waiver of 5 years, with compulsory 15-year Insurable employment along with paid Contribution. A lump sum Old-Age Grant is also paid to an Insured Person (IP) who has less than 15 years insurable employment, but not less than two years.
EOBI has first time started disbursement of Pension to its IPs in 1983 with the amount or Rs.75 p.m, at present, EOBI is paying a minimum monthly Pension of Rs. 8,500 p.m. and the maximum pension is calculated as per following EOBI Pension formula.
(Average Minimum Monthly Wages x No. of years of Insurable Employment)
50
However, EOBI is a pioneer Institution of the country, whose Pensioner are very easily getting their monthly Pension through ATM card, without any inconvenience of waiting and long queues. Presently Bank Al-Falah Ltd. (BAFL) is authorized bank of EOBI and providing services of online collection of Contribution from registered Employers and disbursement of monthly Pension through ATM Card since 2016 throughout Pakistan.
Looking at the current plight and miserable situation of EOBI, the passage of time Federal Government has forgotten its Constitutional obligations made by under Article 38 (c) of the Constitution of Islamic Republic of Pakistan that: The State shall provide for all persons employed in the service of Pakistan or otherwise, social security by compulsory social insurance or other means.
Therefore, EOBI Pension Scheme’s two main stakeholders Federal Government and Employers community are showing gross irresponsibility and negligence towards their legal and moral obligations for the millions of employees, workers and labour for their fundamental Pension rights. Both main stakeholders are not paying their share and actual rate of contribution to the EOBI pension fund Trust. A vast majority of Employer and Establishments are openly violating the Sec.37 of EOB Act 1976, and under the guise of 18th Constitutional Amendment.
The Plight of EOBI!
Due to the lack of interest of the Federal Government and EOBI Management, most of the Employers and organizations has registered in small numbers instead of actual number of their employees, workers and labours only as a show off and they are also not paying their actual contribution. Employers Federations, Trade and Industries Associations and other Employers bodies of the country are also playing an active negative role of depriving their employees, workers and labours and also their survivors of their future pension rights, which caused denying of fundamental rights of millions of employees, workers and labour of the country, those has shed their blood and sweat for the industrial production, development and prosperity of the country.
The 18th Amendment of the Constitution of Pakisan was passed by the National Assembly of Pakistan on April 8, 2010, as a result 15 Ministries including EOBIs’ Ministry of Labour and Manpower were devolved at federal level and were given to the provinces. Due to devolution under the 18th Amendment, EOB Act.1976 has become frozen and now it is only valid for federal territory Islamabad and Gilgit Baltistan. Which created a severe constitutional, administrative and financial crisis for the survival of EOB Pension Scheme.
Therefore, Government of Sindh under the guise of 18th Amendment has established its own Sindh Employees’ Old-Age Benefits Institution (EOBI) in 2014. However, the KPK and Balochistan Assembly has already passed Resolution to retain EOBI in Federal Government. In view of this complex situation the Council of Common Interest (CCI), which resolves disputes over the placement of Departments under the Federation or Provinces under the 18th Amendment has decided in its 41st meeting held on 6th August 2020 at Islamabad that: EOBI shall remain with Federal Government till such time a mutually agreed mechanism developed.
The devolution issue of EOBI is also under sub judice before Supreme Court of Pakistan under case No.39/2012. But all of this has had a devastating effect on Employers’ monthly Contributions to EOBI. The majority of registered Employers, especially in Punjab province, they are paying a 6% monthly Contribution of EOBI a meager amount of Rs.170 p.m per Insured Person as per the of Rs.3,000 Minimum Wage of year 2005, instead of the current Minimum Wage of Rs. 25,000 per month, by which the EOBI contribution becomes Rs.1500 p. m per Insured Person. As a result of the 18th Amendment, EOBI Pension Scheme has suffered irreparable damage.
The Plight of EOBI!
According to Federal Bureau of Statistics Pakistan that the total current labour force of Pakistan is about 750 million. Unfortunately, EOBI has so far registered about only 9.7 million of employees, workers and labours throughout Pakistan, and a large No. of employees and workers and labours are still unregistered and are being deprived of their Pension rights under the EOBI Pension Scheme.
EOBI Performance at a glance
upto 30th April 2022
Total No. of Registered Employers: 139,608
Total No. of Insured Persons: 9,797,758
Total No. of Pensioners: 768,146
Contribution collected: Rs. 24,186,697,286 (July 2021 to April 2022)
Pension Disbursed: Rs. 37,694,328,968 (July 2021 to April 2022)
Collection of contribution from registered employers without any particular name, father name and CNIC No. residential address and Cell No. of the concerned employees, caused EOBI does not have required data of most of its registered employees. Due to the payment of Contribution in anonymous (بے نامی) accounts, by the registered and new employers, million of deserving employees are not only deprived of the legal right of registration in EOBI, getting EOBI Registration card PI-03 and they and their survivors may also lose their future pension benefits, forever.
Due to quick rising of inflation and depreciation of the rupee, it is being difficult for pensioners to survive on a meager EOBI Pension of Rs 8,500 p.m. Therefore, EOBI Pensioners often demands an increase in Pension, a prescribed procedure has been laid down under the EOBI Act 1976 for increase of pension.
According to section 21 of EOB Act 1976: The Institution shall at intervals of not more than three years, have an actuarial valuation made in the prescribed manner of the assets and liabilities and no change in rate of contribution or benefits under the Act shall be made without proper actuarial valuation.
Therefore, it is clear that the Federal Government, the Prime Minister or the Federal Minister OP&HRD and Finance Minister, do not authorized to any increase of EOBI pension, like other government employees (Civil Servants and Armed Forces) pensions in the annual budget. In the past, some governments had illegally increased EOBI pensions even though the fund does not have the required capacity on the basis of gaining political sympathy of the pensioners, as a result, the EOBI Pension fund has been severely affected, so there is an urgent need for a adequate increase in pension after Actuarial valuation of assets and liabilities of EOBI to provide relief them.
It is important that Federal Government immediately restore its Matching Grant to EOBI, stopped since 1995 and all registered employers and Organizations must pay their due monthly contribution @ of Rs.1500 p.m. to EOBI, according to the existing Minimum Wage of Rs.25,000 p.m, as a result, hopefully that the EOBI Pension can be increased up-to Rs. 25,000 per month.
Pensioners often suffer from various ailments in old age and are in dire need of medicine and proper health care. In view of this purpose a past Management of EOBI had set up a Non-life Insurance Company Sahara Insurance Company Ltd. (SICL) in 2013, with a paid-up capital of Rs. 500 million and Security Exchange Commission of Pakistan (SECP) has issued a licence to SICL to give cover health care facilities to EOBI pensioners. Under the plan, the EOBI was intended to provide health coverage to its pensioners for five major diseases including heart, liver and kidney ailments. The premium of the insurance cover will be paid by the Workers Welfare Fund (WWF). SICL has been inactive for a long time, the reason unknown. The Sahara Insurance Company needs to be activated immediately.
However, some EOBI dishonest and corrupt officials involved in Mega Scandal, massive fraud and embezzlement cases have not been severely punished, therefore time to time abuse of power, frauds and embezzlement cases in EOBI Pension fund Trust is still continues as usual without any fear and accountability by some dishonest and corrupt officials of EOBI.
According to FIA investigation report some EOBI corrupt officials has illegally purchased extremely low-valued 17,350,000 shares at the highest prices in the name of Pension fund investments and in order to get their huge commissions with the connivance of a renowned brokerage house od Karachi and M/s Amtex (Pvt.) Ltd. Karachi during 2010-2012.
According to the EOB Act 1976, Employees’ Old-Age Benefits Institution, is not a business, trade or manufacturer but a service as it to provides Insured Person in the shape of Old-Age allowance and/or Invalidity Allowance.
Contrary to this clear law, a past Management of EOBI headed by then Chairman Brig. (R) Akhtar Zamin has set up Pakistan Real Estate Investment and Management Company (PRIMACO), it was registered with Security Exchange Commission of Pakistan on 22 March 2006 with a paid-up capital of Rs.100 million. Earlier, a Real Estate department was set up headed by Mr. N.H Sabzwari, a foreign qualified, honest and well experienced civil engineer for this purpose. Nevertheless, the then Chairman EOBI, an influential Brigadier (R) Akhtar Zamin has decided to set up PRIMACO.
But despite the spending of million and billions of rupees from EOBI Pension fund Trust on various Mega business and commercial construction projects, the PRIMACO has totally failed, due to large scale abuse of power, mismanagement, irregularities and massive corruption in these Projects. It should also be noted that several CEOs of PRIMACO have been removed on serious charges of incompetence and corruption. Now the PRIMACO has become a heavy burden on EOBI and it is also called the “white elephant of EOBI”.
During 2010 to 2013 then Chairman EOBI Zafar Iqbal Gondal has illegally provided 268 brand new vehicles to illegally appointed beloved and influential officers under a Car loan Scheme like Suzuki Bolan, Suzuki Mehran, Suzuki Cultus and Toyota Corolla GLI with the registration of Government of Pakistan green number plates (GP) and also brand-new laptop computers provided to them. In this regard, Rs. 932,000 each was paid by EOBI to these beloved illegal appointed officers on monthly deduction basis. But following the announcement of the Supreme Court of Pakistan decision on CP 06/2011on 17 March 2014, the sacked officers fled away along with 168 EOBI official vehicles and laptops.
Over 5 years elapsed and after the strong directives of Public Accounts Committee (PAC),Islamabad and EOBI Board of Trustees a FIR No.188/2019 has been registered at Firozabad Police Station Karachi on May 2019 against 168 officers fleeing with EOBI official cars and laptops.The unauthorised use of EOBI official vehicles, bearing of Government of Pakistan number plates (GP No.) by the 168 terminated officers may cause huge security risk in the country due to the poor law and order and increasing incidents of terrorism. Similarly, EOBI also have failed to recover about Rs.10 billion of Contribution dues/arrears from defaulters Employers.
EOBI, is facing enormous administrative and financial challenges and hardship for the last few years. Several important key posts have been lying vacant in EOBI for a long time, not even a permanent Chairman EOBI, Director General/Investment Advisor and both Director General Operations, South (Sindh and Balochistan) and North (Punjab, KPK and GB) posts have been lying vacant for a long time. These high officials appointed by the Federal Government for the three-year teram.
Although, EOBI has always faced the required manpower, but in recent years due to massive retirement of the employees of the Institution and no timely promotion of deserving senior and experienced officers and a regular ban on fresh recruitment by the Federal Government, EOBI is presently working on (about 700 employees) one third of its approved strength. whole Institution is being run on Ad-hocism and like dislike policy prevails instead of a merit base and right man right job policy by neglecting qualified, senior, experienced and honest officers the entire EOBI is ruled by illegal and power full Deputationist and most junior and OPS beloved and influential officers belongs to 2007 and 2014 batch.
Presently, EOBI Pension Scheme is a discriminatory Pension Scheme in which the condition of having 10 or more employees and in which they are registered by their employers instead of directly. EOBI need to change the existing procedure for registration of employees by their concerned employers. EOB Pension Scheme must be transformed into an Universal and mandatory Pension Scheme by including every 18 year age Pakistani bread earner, serving in the private sector, informal sector, self employed or home based workers and also be introduce a Self Registration Scheme for the employees, workers and labours belongs to informal sector and self employed, like neighbouring country Government-backed Pension Scheme “Atal Pension Yojana” (APY) or National Social Security Fund (NSSF) of eastern african country Republic of Kenya, which are a Contributory and Universal Pension Schemes and applicable to all citizens working in the organized and unorganized sectors.
Due to the huge imbalance in the collection of contributions and the payment of pensions and increasing number of pensioners over the time. Majority of employers are paying a meager amount of EOBI contribution as per the very old rates Rs.170/ p,m. per Insured Person, as per year 2005 Minimum Wage, there is an urgent need to increase the existing rate of 6% EOBI contribution to 10% (Employer share 8% and employee share 2%).
To maintain its viability and long-term survival of EOBI, it is imperative that the Federal Government to take immediate action and step forward to restore the Matching Grant of EOBI which has been stopped since 1995 for the growth and sustainability of EOBI Pension fund Trust and expanding the scope of EOBI Pension Scheme, and all registered employers must pay 6% regular monthly contribution @ Rs.1,500 p.m. per Insured Person to EOBI, as per current Minimum Wage of Rs.25,000.
A series of Mega Scandals, frauds and embezzlement in EOBI Pension Fund Trust have severely damaged the image and reputation of EOBI. Therefore, in order to save EOBI, it is imperative that officials who involved in Mega Scandal, embezzlement, fraud and abuse of power should be immediately dismissed and huge money of EOBI Pension fund Trust should be recovered from them. This looted money must be deposited in the EOBI Pension Fund Trust.
To achieve this goal, the Federal Government urgently needs to made necessary reforms and required legislation in EOB Act 1976 to include the large segment of Informal sector employees, workers and labours belongs to agriculture, fishing, public and goods transport, small and medium enterprises, religious educational institutions, health care and charity organizations, domestic servants, home based workers and Self-employed.
This is a great challenge for newly established Federal Government to fulfil its constitutional responsibilities, and to realize the serious problems faced by the EOBI’s present and future pensioners. If the Federal Government does not address the current alarming situation facing by EOBI, then the destruction of this national welfare institution is certain. Consequently, the total loss will be borne by the millions of Pensioners, Insured Persons/future pensioners including disabled and widow pensioners.
by: Israr Ayoubi
Ex. PRO, EOBI
Founder Social Safety Net, Pakistan
0335-2897910
0300-3913793
CNIC No. 42101-7839708-5
Postal Address: C-19, Hasan Lodge, Block 7, F.B. Area, Karachi