Controversy Over Eobi and Social Security Contributions: Law and Practice of Minimum Wage and Upper Wage Limit

Author:Dr. Perwez Shafi

Today if one is to ask a simple question what is the current contribution for EOBI and Social Security? it is very difficult to answer. Interestingly, there is no single and legally correct answer, in fact employers are being asked to pay from a range of contributions -- from maximum to minimum -- as arbitrarily determined by the respective Institutions. In the end, contribution is open to negotiations and on whatever amount an agreement is reached between employers and Institutions, that will be the contribution. Needless to say that employer is justifiably bewildered and confused about contribution and feeling being exploited.

This status has reached because two factors used to calculate EOBI and Social Security contributions are the source of confusion in all four provinces. First is the way minimum wage for unskilled workers is used in EOBI law, and second is increase in Social Security Wage Limit which determines maximum contribution.

It is easy to calculate contributions according to the law but the reality is much more complicated and both EOBI and Social Security Institutions deliberately created huge confusion by using these two factors not according to their own law.

EOBI Contributions

First, EOBI used every legal gimmick, half truths, misinterpreting their own statute and deception in their books to gauged more contributions from employers while paying less pension to workers. arbitrarily declared few years back to pay contribution on wages Rs. 8000 pm when the minimum wage was something different. They were happy because they were paying the pension to retired workers on Rs. 5000.

When the inflation and cost of living increased significantly, the EOBI tried to pull a fast one on employers. The Minimum Wages for the Unskilled Workers (Amendment) Act, 2016 was passed as a Federal statute in February 2016 which allowed EOBI to demand increased contributions from employers of Islamabad Capital Territory only (see the text of the statute on p. 8 of the March-April 2016 issue). Using the new 2016 law EOBI started demanding increased contributions from employers all over the country. was a clear deception. This interpretation was challenged by this author as well as by Employers' Federation of Pakistan and others in a petition to the Sindh High Court which granted STAY ORDER (see copy on p. 10-11 of the March-April 2016 issue of EASTERN WORKER). So legally and technically the contribution remained on wages Rs. 8000 while the minimum...

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