RECENTLY, the current National Assembly celebrated the output of its first year, during which a record 47 bills were passed. On the other hand, the employers of industrial and commercial establishments and the Employees’ Old-Age Benefits Institution (EOBI) have been fighting legal battles with each other since 2010, about the rate at which monthly contributions are payable by the former.
The 18th Amendment, passed in 2010, devolved labour laws to the provinces. All were devolved except the Employees’ Old-Age Benefits Act, 1976. The decision by the federal government to not do so was not wrong as in some cases, retired employees left the cities where they had been employed to return to their ancestral towns and villages. However, simultaneously, it should have passed a law regularising this exception.
As this was not done, the arrangement continued to be managed on an ad hoc basis, which started causing problems for both the employers and EOBI. Because of devolution, the idea of provincial and trans-provincial organisations took shape; it was formalised through the (federal) Industrial Relations Act, 2012, which defines ‘trans-provincial’ as any establishment, group of establishments, or industry, with branches in more than one province.
As the EOB Act of 1976 continued to remain operative by default, its following definition of wages remains valid: ‘wages’ means the rates of wages as declared under the Minimum Wages for Unskilled Workers Ordinance, 1969. In April 2010, the minimum wage was Rs6,000, and thereafter no increase in the minimum wage was made under the Ordinance of 1969.
The matter of monthly contributions remains pending.
Nevertheless, the minimum wages for unskilled workers continued to be increased under the Minimum Wages Ordinance, 1961, along with minimum wage increase in hundreds of other jobs. Employers have not been accepting these increases for the purpose of paying EOBI contributions.
Subsequently, the enactment of the Sindh Employees Old-Age Benefits Act, 2014, caused further complications because employers in Sindh got confused as to which law was to be followed. As the federal government did not transfer the funds to the Sindh government, this Act was not implemented. Since the enactment was valid, according to the 18th Amendment, around 80 employers in Sindh stopped paying monthly contributions to EOBI managed by the federal government. They did so under the apprehension that the Sindh EOBI might also claim the same from them and they would have no basis to refuse.
The federal EOBI could take action against neither the Sindh employers, who had stopped paying monthly contributions, nor against employers in the rest of the country, who were paying contributions at whatever rate they deemed appropriate. These rates varied from six per cent (including 1pc of the employee’s share) of Rs3,000 on behalf of every insured employee to 6pc of the prevalent minimum wage fixed under the Minimum Wage Ordinance, 1961. Under the latter, minimum wages increased from Rs6,000 in 2010 to Rs37,000 per month in 2024.
To remove this ambiguity and decide matters, several employers filed petitions before their respective high courts for determination of the rate of EOBI contribution. The high courts in Sindh and Balochistan decided that the contribution was payable at 6pc of the prevalent minimum wage. However, the high courts in Lahore and Islamabad, as well as a recent judgement of the Peshawar High Court, have decided that the contribution is payable at 6pc of Rs3,000.
The latter courts have relied on a proviso of the EOB Act, 1976 that states: “Provided that no contribution shall be payable on so much of an insured person’s wages as in excess of Rs3,000”. Although this proviso was omitted through the Finance Act, 2005, it was later restored by a Supreme Court judgement of 2017.
Several employers besides EOBI, have gone into appeal before the apex court against the respective judgements of the high courts, but the matter is yet to be taken up. To end this chaotic situation and the wrangling between employers and the EOBI, the matter should be decided quickly by the court.
The federal government has also requested formalising the management of the EOB scheme either by passing a law to this effect via a simple majority or by making this an exception to the devolution of labour laws to the provinces through a constitutional amendment. This will also enable the government to improve the plight of EOBI pensioners, who unlike government employees, keep waiting for years for their pensions to increase.
Over the last five years, the rate of EOBI pension was revised only twice — from Rs6,500 to Rs8,500 per month effective from Jan 1, 2020, and to Rs10,000 per month effective from July 2023.
The writer is a consultant in human resources at the Aga Khan University Hospital.
Published in Dawn, March 18th, 2025
