The Employees’ Old-Age Benefits Act, 1976 was promulgated in 1976 “to repeal and re-enact the law relating to old-age benefits for the persons employed in industrial, commercial and other organizations”.
Benefits such as old-age pension, invalidity pension, survivor’s pension, old-age grant, etc were to be provided to the eligible employees by the Employees’ Old-Age Benefits Institution (EOBI) established under the Act.
The age limit for eligibility for the old-age pension after 15 years of insurable employment was 60 years for men and 55 years for women. Employees with fewer than 15 years of insurable employment were entitled to a one-time payment of an old-age grant. In the beginning, the act applied only to non-management and supervisory staff, but an amendment in 1994 extended it to all management staff of the organisations.
Until July 2005, the monthly contribution amount was payable to EOBI as a percentage of a fixed amount, but an amendment defined ‘wages’ as the rates of wages declared under the Minimum Wages for Unskilled Workers Ordinance, 1969. At present, the monthly contribution is 5.0 per cent of the minimum wage while an additional amount equivalent to 1.0 per cent of the same wage is shared by every insured employee.
Due to legal disputes between employers and the EOBI in the superior courts, the majority of employers pay contributions at 6.0 per cent of the prevailing monthly minimum wage of Rs40,000. However, some employers who have obtained stay orders from the courts continue to pay 6.0 per cent of the minimum wage of Rs3,000 on behalf of their insured employees. Rs3,000 was the minimum wage in 2005, when the law on contribution rates was amended.
In April 2010, the labour laws were devolved to the provinces by virtue of the 18th Amendment. All the labour laws were devolved to the provinces except the EOAB Act, which continued to be administered by the federal government.
The rationale behind the federal government’s decision to retain management of EOBI was sound, as beneficiaries of the pension scheme lived across Pakistan. When employees working in the industrial towns of Karachi, Lahore and Faisalabad return to their native places after retirement, they would not face any difficulty receiving their monthly pension, which came from the same source.
Besides, the provinces of Balochistan and Khyber Pakhtunkhwa were unwilling to take over the scheme due to limited business and industrialisation, resulting in a paucity of funds. To resolve all the legal and other issues, the federal government could have regularised the matter by getting a law to that effect passed by a simple majority in parliament, but it somehow chose not to act.
As a result, the above situation has remained in limbo for the last 16 years, causing unnecessary legal battles between the employers and the EOBI over the monthly rate of EOBI contribution, which remains unresolved. The point of contention is the definition of ‘wages’ as given in the EOAB Act. If the federal government amends this definition in the 1969 ordinance, its application will remain confined to the Islamabad Capital Territory.
Since devolution, the Sindh government has been quite keen to take over the EOAB scheme, but the federal government has not transferred the respective funds to the provinces. The government even legislated the Sindh Employees’ Old-Age Benefits Act 2014, which could not be promulgated in the presence of a parallel act operated by the federal government.
Since April 2010, the Punjab government has actively supported the federal government’s retention of EOBI. At the same time, the federal government has never taken the initiative of getting the arrangement legalised through parliament.
In a dramatic move on April 21, 2026, the Punjab Assembly passed a resolution unanimously, seeking the handover of EOBI to the provinces. The resolution states, “The EOBI has not been transferred to provinces under the 18th Amendment till now, which is a violation of the constitution”. The Resolution further points out that centralised control and bureaucratic complications have worsened the situation. Non-receipt of the payable contribution results in a reduction in resources for pensioners.
It is surprising that after 16 years of devolution, the Punjab government has belatedly realised that retention of EOBI by the federal government was a ‘violation’ of the constitution.
The fact is that over the years, successive governments in Punjab have been fully supportive of the federal government in continuing to administer the scheme. If the latter were desired, it could have resolved both the issues of the scheme’s retention and the rate of employers’ contribution either through a constitutional amendment or an act of parliament by a simple majority.
Now that both the Punjab and Sindh governments are strongly advocating the transfer of EOBI to the provinces, they are likely to achieve their goal despite any opposition from the other two provinces. Soon thereafter, the federal government should frame rules governing how the scheme will be coordinated among the provinces so that the interests of pensioners are safeguarded.
The writer is a consultant in human resources at the Aga Khan University Hospital. He can be reached at: [email protected]
