The Employees’ Old-Age Benefits Act, 1976 has been amended through Finance Act 2005. The notification in this regard has been published in the Gazette of Pakistan, Extraordinary, Part-I, dated 1^st July 2005, as Act VII of 2005. Through these amendments, minimum pension has been enhanced from  Rs. 700/= to Rs. 1000/= per month, Contribution has been linked with minimum wages for unskilled workers, Self-Assessment Scheme has been discontinued and verification of books of accounts has been restricted. The salient features of these amendments are as under:

1.    Omission of Clause (oa) of Section 2:

In Section 2 of the Act, the Clause (oa), defining “Self-Assessment Scheme” has been omitted. Further omission of Section 12-A has stopped the operation of Self-Assessment Scheme w.e.f. 01-07-2005. The employers who had opted for Self-Assessment Scheme shall now be required to pay contribution @ Rs. 210/- per IP, per month ( Rs. 180/- per month as employers contribution and Rs. 30/- per month as IP’s contribution) from 01-07-2005 onwards like other employers.

2.      Amendment in Clause (p) of Section 2

The definition of the term “ Wages” has also been substituted by a new definition which is as under:

“Wages” means the rate of wages as declared under the Minimum Wages for unskilled Workers Ordinance, 1969 (W.P. Ordinance XX of 1969)

This amendment has simplified the definition of the term “wages”. After incorporation of new definition the employer has to pay contribution @ 6% of wages for each employee in his insurable employment i.e. Rs. 180/= per month per employee. IPs contribution has also been revised as 1% of wages, making it Rs. 30/- per IP per month.

3.      Amendment in Clauses (b) and (f) of Sub-Section (1) of Section 7.

Through these amendments in Section 7 of the EOB Act, the number of the members of Board of Trustees (BOT) has been decreased from 19 to 16 withdrawing the representatives of Ministry of Commerce & Industries and FA, EOBI from the Board.

Now there is equal representation of Government and Private members on the Board as under:

Secretary, Labour, Manpower Division.

Joint Secretary, Labour, Manpower Division.

Financial Advisor, Labour.

Chairman, EOBI.

Four Provincial Secretaries, Labour.

Eight representatives of employers and employees from the four provinces.

4.      Amendment in Section 9

Through the amendment in section 9 of the Act, the rate of contribution has been enhanced from 5% to 6% of the wages. The first proviso of Section 9, fixing the maximum ceiling of Rs. 3000/= of wages on which contribution was payable has been omitted.

With the change in the definition of “Wages” as the “minimum wages”, the employer’s contribution has become almost as a flat rate of Rs. 180/= per month. With the omission of the first proviso though it seems that the cap of the maximum wages on which contribution is payable has been removed but if we read Section 9 with Section 2 (p) it be comes clear that contribution is payable @ 6% of wages which has been defined as minimum wages i.e. Rs. 3000/= presently. Thus contribution cannot be collected on the wages in excess of minimum wages which is Rs. 3000. After amendment of this Section, contribution payable by the employer for all employees in his insurable employment will be 6% of the wages as defined under Section 9 of the Act.

5.         Amendment in Section 9-B

Through the amendment in Section 9B the rate of employees’ contribution has also been brought in line with the employer’s contribution. After this amendment Insured Person’s contribution shall be 1% of the wages i.e. Rs. 3000/= presently as defined under Section 2(p).

6.          Amendments in Section 12

Section 12 of the EOB Act deals with checking of employer’s books of accounts. Its Sub-Section (2) has been substituted as under:

“(2). The official referred to in Sub-Section (1) shall not demand production of account books and other documents referred to in clause (b) of Sub-Section (1) for a period of two years from the date of registration of the establishment or the 1^st day of July, 2005, whichever is later, if the employer does not reduce the number of insured persons in respect of whom contribution are paid under Section 9.

Provided that on expiry of two years’ period, if the employer enhances the number of insured persons by at least ten per cent, it shall be accepted without any question otherwise checking of record shall be done as provided in Sub-Section (1), by an officer not below the rank of Assistant Director, duly authorized in this behalf and no question shall be asked about the previous two years.”

The above amendment implies that in case of registered employers, from 1^st July 2005 onwards and in case of newly registered establishment, from the date of registration there shall be no verification/examination of books of accounts for two years provided the employer does not reduce the number of Insured Persons on whose behalf he is making payment.

In case the employer reduces the number of Insured Persons during these two years, his books of accounts shall be verified by an officer not below the rank of Assistant Director.

Detailed procedure for verification/examination of books shall be circulated separately.

The restriction to inspect/verify the books of accounts for two years has enhanced the role of the beat officers and their Supervisors in monitoring payments of contribution. It is their responsibility to debit employers accounts under “Accrual Accounting System” at the beginning of every month and make adjustments in the prescribed manner as already given in Circular # 15/2003-04.

B&C Department and Zonal Offices shall ensure implementation of the system and monitor progress accordingly.

7.   Amendment in Sub-Section (3) of Section 12

The words “in the prescribed manner” has been substituted for the word “purpose” to devise a mechanism in the relevant Regulation/Rule for maintenance of record and returns liable to be submitted to the Institution in this behalf.

8.  Amendment in of Section 12A

Section 12A prescribing the manner of the applicability of Self-Assessment Scheme has been omitted. After the omission of clause 2(oa) and Section 12A the operation of Self-Assessment Scheme has been ceased.

9.  Amendment in Schedule

The para 2 of the Schedule to the EOB Act 1976 has also been amended. After this amendment the minimum pension payable to an insured person shall be Rs. 1000/= from 1^st January, 2005.

Through this amendment all those pensioners who are getting pension within the range of Rs. 700/= to Rs. 999/= per month shall now get Rs. 1000/= per month. The change in the rate shall be effective from 1^st January 2005. This change however shall be proportionately applied on reduced pension and survivors pension where the pensioner has left behind more than one survivors.

                                                                                            

                                                                                              (Khalid Javed Chaudhry)

                                                                                                         DDG(B&C)

 

Copy to:

1. Chairman.

2. FA/DG(F&A) and DG(Ops) Secretariats.

3. All Departmental/Zonal/Regional Heads.

4. Director (P&P) for publication of silent features of amendment in newsletter.