Download - Complete Thesis on System Failure in EOBI
““SYSTEM FAILURE IN EMPLOYEES OLDSYSTEM FAILURE IN EMPLOYEES OLD AGE AGE BENEFITBENEFIT INSTITUTION INSTITUTION””
______________________________
A thesisPresented tothe faculty of
Management sciencesBahria Institute of Management & Computer Sciences, Karachi
_______________________________
In partial fulfillmentof the Requirement for the
Degree Master in Business Administration
_______________________________
By
ABDUL WAHEEDMay 2005
BAHRIA UNIVERSITYINSTITUTE OF MANAGEMENT AN COMPUTER SCIENCES,
KARACHI
RECOMMENDATION FOR ORAL EXAMINATION
This project/thesis hereto attached, entitled, “ System Failure in Employees Old Age Benefit Institution ” submitted by Abdul waheed in partial fulfillment of the requirements for the degree Master in Business Administration, is hereby
recommended for appropriate action.
Date: ______________________ Advisor: _______________
PROJECT/ THESIS COMMITTEE
In partial fulfillment of the requirements for the degree Master in Business Administration, this thesis entitled, “System Failure in Employees Old Age
Benefit Institution”, is hereby recommended for Oral Examination.
________________________Chairman
_____________________ _______________________ ______________________
Member Member Member
_________________________Date
BAHRIA UNIVERSITYINSTITUTE OF MANAGEMENT & COMPUTER SCIENCES
KARACHI
Project/ thesis “System Failure in Employees Old Age Benefit Institution”
Date: ______________
Time: _______________
PANEL OF ORAL EXAMINARS ACTION
_________________ __________________ Chairman
__________________ ________________ Member
___________________ _________________ Member
_______________________Advisor
BAHRIA UNIVERSITY
INSTITUTE OF MANAGEMENT AN COMPUTER SCIENCES, KARACHI
APPROVAL SHEET
This project/thesis entitled,” System Failure in Employees Old Age Benefit Institution”, prepared and submitted by Abdul Waheed in partial fulfillment of the
requirements for the degree Master in Business Administration has been examined and recommended for acceptance and approval.
THESIS COMMITTEE
________________________Chairman
______________________ _______________________ _______________________
Member Member Member
PANEL OF EXAMINERS
Approved by the committee on Oral Examination with a grade of _______________
________________________Chairman
______________________ _______________________ _______________________
Member Member Member
__________________________Head of the DepartmentManagement Sciences.
ABSTRACTABSTRACT
The topic of my project is ‘’System Failure in Employees Old Age Benefit
Institution (EOBI).In this project I basically tried to find out the Causes and
problems faced by EOBI due to which it is not viable, credible, and
progressive. I acquired data from both primary and secondary sources. The
data for the study has been collected from interviews of different EOBI
Employees as well as clients of EOBI. First method for collecting information
was based on un – structure interview to know important issues. Questionnaire
has also been designed for study. It’s an efficient data collection mechanism to
analyze the problems .100 copies were distributed to the respondents
belonging different EOBI Regional offices as well as head 0ffice and
administered personally. The data for the study has been collected from the
Newspapers also. As it is an important medium of data collection. Data for the
study has also been gathered from another very important source that is the
internet. Much important information about the study was available through
internet like from the site of Employees old Age Benefit institution. Was quite
useful in preparing the thesis.
Various benefits that the labourers are entitled to, if provided with complete
honesty by the employers and the institutions concerned, can safeguard their
rights to a great extent. If all these ingredients are present in an industrial
setup, the workers remain satisfied and content in their job and can also make
production more efficient.
All workers need to be provided old-age security after a lifetime of hard work.
The existing pension arrangements have been weak in terms of coverage and
benefits. These arrangements cover only a small segment of labor force in the
public sector and private sector establishments.
The nascent private pension system is faced with a number of problems, poor
records, financial mismanagement and inefficiency, low payouts, and
harassment of employers and workers. An over-centralized organizational
structure, in EOBI as well as rigid, often irrelevant, and unevenly enforced
rules and mismanagement, result in delays in responding to clients, due to
employees & employers think that there is no need to registration due to which
collection is very low.
There is also inadequate cooperation between different, offices. Such
problems create problems not only for employees but also for employers and
organizational effectiveness.
In many private enterprises, labour is hired on a contract basis and stays only
for three to four months. With the completion of the assignment, existing
workers are laid off and new labour is hired for the next order. This short
period of work does not allow the labourers to become eligible for any type of
benefit as three months are usually taken as the probation period before a
worker can be made permanent. Due to these unfair terms of hiring, social
security and EOBI benefits are also evaded.
Where an enterprise hires 10 or more workers, it commonly starts portraying
itself as several small enterprises with different owners Since the inception of
privatisation of industries, new owners of privatised units have been insisting
on laying off all labour and bringing newly hired workers on their own terms.,
each having 8 or fewer workers.
EOBI Institution experiences administrative problems in record keeping and in
identifying defaulters and enforcing payment. Because employees don’t want
to pay contribution they don’t give importance pension after retirement.
There is also another problem that the majority of laborers are not aware of all
the labor laws and how they can benefit from them. 80% don’t know about
EOBI, to whom it provides benefits and when it provide Remaining 20%
know there is a welfare scheme for Old Age benefits but they don’t want to
register themselves because there are a lot of formalities and it takes time.
Improvement in registration record of employers, employees, contributions
would help to make EOBI progressive and actuarial Valuation to be made
every three years.
Awareness among workers about their rights, due benefits and labor laws can
play a significant role in reducing anti-welfare activities within the welfare
institutions. The majority of laborers are not aware of all the labors laws and
how they can benefit from them. Awareness could be through media including
radio, newspapers, and television and workers can know how they can register
for benefits.
ACKNOWLEDGMENTACKNOWLEDGMENT
It is a privilege to extend my thanks to
ALMIGHTY ALLAH
Because nothing is possible in this world with out HIS assertion.
This research is done under the supervision of Mr. Reza H. Syed who is the teacher of
the final project during my study of MBA at Bahria University. Due to his teachings
and suggestions, I was able to complete my project. I would like to show my gratitude
to him for the progress that I have made.
I would like to thank. Of EOBI director of public relation and other concern people
who gave me the needed information and for cooperating with me in this respect.
They have made great contribution to this thesis in this case.
I would also like to thank Mr.Baber Ali, Mr.S.M.Rizvi and Mr. Zafar A. Manan for
guiding and giving me options relating to the project.
I would like to thank my advisor Mr.Salman Ahmed khan for guiding me and
cooperating with me throughout the project.
LAST BUT NOT THE LEAST , MY GRATITUDE GOES TOWARDS MY
PARENTS AND OTHER MY FAMILIY MEMBERS WHOSE CONTINUOUS
LOVE , SUPPORT , GUIDANCE AND ENCOURAGEMENT MADE ME WHAT I
AM TODAY .
DEDICATION
I would like to dedicate my thesis to my parents.
TABLE OF CONTENTSTABLE OF CONTENTSDescription Page
NoChapter One: Background of the subject/Topic and statement of the Problem.
Introduction Statement of Problem Assumption to the objectives Significance of the Study Scope De – Limitations Definitions Of Terms
188889
Chapter Two: Research Method & Procedure Research Design & Methods Sources of Data Treatment of the Data Presentation Analysis
12131313
Chapter Three: Review of related literature & Studies
Local Literature Collection and payment of Pension to Employees During 1993-
2004 DIFFERENT PRACTICES IN NTERPRISES
INSUFFICIENT PENSION
Foreign Literature Artic cal on pensions Areas for the Further Studies
14
15
192122
232326
Chapter Four: Presentation Analysis
Frequency and percentage distribution of response of Survey. Frequency and percentage distribution regarding the response of
survey from different areas of the city. Frequency and percentage about problems faced by EOBI. Frequency and percentage about problems. Frequency and percentage about Employees Job satisfaction. Frequency and percentage about Reward system. Frequency and percentage about awareness.
27
28
293132333435
CHAPTER FIVE: Summary of Findings, Conclusion & Recommendations.
Research Findings Conclusion Drawn Recommendations
363739
References and Bibliography 40
CHAPTER ONECHAPTER ONE
STATEMENT OF PROBLEMSTATEMENT OF PROBLEM
&&
IT’S BACKGROUNDIT’S BACKGROUND
INTRODUCTIONINTRODUCTION
STATEMENT OF PROBLEMSTATEMENT OF PROBLEM
SIGNIFICANCE OF STUDYSIGNIFICANCE OF STUDY
SCOPE & DELIMITATIONSCOPE & DELIMITATION
DEFINITIONSDEFINITIONS
INTRODUCTIONINTRODUCTION
Welfare is a term encompassing many facets of human life. The concept of welfare
builds upon providing opportunities to all human beings for attaining health facilities,
quality education, prestigious jobs with job security and a regular income, and a
strong asset base.
Workers’ welfare is an essential element for efficient productivity. Factory workers
form the backbone of the whole productive system and this makes their welfare a
crucial part of an industrial setup. Workers’ relations with their employers and their
working environment are basic levels at which their well-being can be maintained.
Numerous government institutions are channelling these benefits to workers today.
The institutions providing social security are:
Employees Social Security Institute (ESSI),
Employees Old Age Benefit Institution (EOBI) and
Workers Welfare Board.
Nearly all the worker welfare measure in Pakistan, administered by Ministry of Labor.
But my thesis is based only on Employees old Age Benefit Institution (EOBI).
The basic knowledge has been taken from EOBI Act 1976.
To be eligible for the benefits, the workers’ job status has to be permanent, the factory
that employs them must be registered with the Labour Department and the number of
total employees must be at least 10. Those workers are registered for social security
whose salary is up to Rs3, 000. Employers must contribute 5 percent of workers’
income to social security for registered workers.
Employees Old-Age Benefits Institution (EOBI) is the primary public social security
scheme for workers in Pakistan providing pensions to workers
The topic of my project is system failure in EOBI.In this project I basically tried to
find out the Causes and problems faced by EOBI due to which it is not viable,
credible, and progressive. The project provides an overview of the performance of
EOBI as well as an analysis of its causes.
EOBI established under Employees Old-age Benefit Act, 1976 administers the only
national pension scheme for employees in private sector industries/establishments
with at least ten employees, excluding those in managerial and professional categories
and directors.
The EOB Act covers all industrial, commercial and other organizations which employ
10 or more persons. Employees in the service of the state, statuary bodies, police
force, armed forces, railways, local bodies, municipal committees and other local
authorities are exempted from the EOB Act. Only employers pay the contributions on
behalf of their employees. These employers may represent national or multinational
organizations. As far as the government employees are concerned, the government
itself paid contribution to the institution. This exercise continued from 1986 to 1995.
In 1995 the government withdrew its contributions towards the institution.
Benefits: There are four benefits available under the Act which are as follows:
1) Old-Age Pension
2) Survivor's Pension
3) Invalidity Pension
4) Old-Age Grant
The rate to be paid to the institution is Five (5%) per cent of the wages/salary up to
the limit of Rs. 3000/-. The presently the maximum amount of contribution payable is
Rs. 150/- per insured person for the wage/salary of Rs. 3000 and above.
OLD-AGE PENSION
Old Age Pension is payable at the age of 60 years for males and 55 years for women.
It is relaxed up to five years in case of persons in employment in the occupation of
mining for at least ten years immediately proceeding retirement.
Requirement for pension: The requirements for receiving pension have been classified
under three options. These are:
a) A person should have 15 years of insurable employment if he enters the EOB
Scheme before the age of 40 years;
b) A person should have 7 years of insurable employment if he enters the EOB
Scheme between 40-45 years of age;
c) A person should have 5 years of insurable employment if he enters the EOB
Scheme at the age of 45 or above.
Calculation of amount of benefit
The calculation of pension for an insured person is based on a number of factors.
Therefore E.O.B.I has defined a formula for calculation of Old-Age Pension which
takes into account all the necessary factors. This formula is as under:
(Average monthly wage *No. of insurable employment years)/50
SURVIVOR'S PENSION
The requirement for survivors is as follows:
a. If the old-age or invalidity pension holder dies, the same amount of pension is
allowed to the surviving spouse of the deceased pensioner, and there is no
discontinuity of pension as such. It is just treated as a conversion case. The
old-age or invalidity pension is converted to survivor's pension.
b. If an insured person dies while in insurable employment and contribution in
respect of him is a payable for at least three years on if an insured person dies
while not in insurable employment and contributions in respect of him/her are
payable for at least five years, minimum pension would be allowed to the
surviving spouse.
c. The survivor's pension will commence from the month following the insured
person's death.
INVALIDITY PENSION
Invalidity pension is payable to that insured person whose normal earnings have
dropped to one third due to any incapacitation. The other conditions in this regard are
that the degree of invalidity is two third and;
Contribution in respect of him is payable for 15 years. However, if the insured person
has less than 15 years of insurable employment to his credit but not less than 5 years
and contributions are payable for not less than three years during the five years
preceding immediately his sustainability of invalidity.
a) Invalidity pension is not payable retroactively for more than six months
b) Invalidity pension is renewed after six months on the medical report. If degree
of invalidity remains more than two third, the pension is continued. If
invalidity pension is allowed continuously to the insured person for five years
then he becomes entitled to invalidity pension for life.
c) Invalidity pension commences from the following month that in which insured
person satisfies the condition for entitlement.
d) Invalidity pension will be calculated according to the formula for old-age
pension. Minimum pension is anyhow payable to him even if the formula
gives an amount which is less than the minimum pension amount.
OLD-AGE GRANT
Old-age grant is allowed to that insured person who is not otherwise entitled to old-
age pension. Old-age grant is approved to that insured person who has attained the
age of 60 (55 in the case of women) years and has at least two years of insurable
employment to his credit.
Calculation of Old-age grant: Old-Age grant is payable in lump sum @ one month's
average wages for each completed year (average wage is to be calculated on the basis
of wages on which contribution was payable in respect of twelve calendar months) of
insurable employment. A period of six months or more will be treated as one year.
As per law, it is the responsibility of the employer to get his establishment registered
with EOBI. However the field force of the institution also persuades the employers
who employ ten or more persons to register themselves with the institution and to
fulfil other liabilities as provided by the law.
Contribution can be deposited only with the banks: The employers are to deposit
contributions only in the HBL authorized branches. Likewise the EOBI pensioners
can derive pensions only from that HBL branch which has been allowed to them as
per their pension card. The offices of the Institution are not allowed to receive any
contribution or disburse and pension.
V A L U E SV A L U E S
• Transparency
• Trust
• Team work
• Integrity
• Professionalism
• Meritocracy
• Courtesy
Fairness
O B J E C T I V E SO B J E C T I V E S
Extend Coverage of “State Pension Scheme” to all persons employed in Pakistan over
a reasonable period.
Transform the EOB Scheme into a viable and popular “State Pension Scheme” (SPS)
for providing security of subsistence pension to all employees at most economical
cost.
Transform EOBI management into most efficient, economical and effective
machinery for operating Public Pension Scheme.
Promote voluntary registration by employers & employees and payment of
contributions by making the Scheme more attractive and least cumbersome.
Ensure generation of maximum income from the investment through honest,
transparent and professional management.
Ensure disbursement of due benefits promptly & gracefully.
FUNCTIONSFUNCTIONS
Identification and Registration of establishments and industries.
Identification and Registration of Insured Persons.
Collection of Contribution @ 5% of first Rs. 3000 of wages of insured Persons
from employer.
EOB Fund Management.
Determination of complaints, questions and disputes.
ACTION PLANACTION PLAN
Key activities of EOBI are enumerated below:-
Registration of employers;
Registration of employees;
Collection of Contribution;
Distribution of Benefits.
STATEMENT OF THE PROBLEMSTATEMENT OF THE PROBLEM
Why EOBI is not a viable, credible, progressive institution devoted to provision of
social security to all persons in service of Pakistan.
AASSUMPTIONSSSUMPTIONS TOTO THETHE O OBJECTIVEBJECTIVE
EOBI is located in Karachi.
There is no corruption in EOBI.
Qualified management.
Minimum pension is Rs700.
SIGNIFICANCE OF THE STUDYSIGNIFICANCE OF THE STUDY
The whole idea of the project is to identify or analyze the System of EOBI and its
performance as well as analysis of causes that make it inefficient.
This study will be significant for policy makers in analyzing the extent of control
This research report on EOBI will assist to make the steps and policies
to reduce its problems. This study aims to look at the history and current state of
EOBI.
SCOPESCOPE
The data for this project will be collected over a three to four-month period of time
only in Karachi.
DELIMITATIONS
There are certain factors, which can delimit my study regarding research on above
mention topic. The following can be important factors:
Response from Employees of EOBI and its clients
Time Factor
DEFINITIONS OF TERMSDEFINITIONS OF TERMS
BENEFITS
Means old-age pension, invalidity pension, widow's pension, old-age grant
and such other payments as may be determined by the Federal Government from time
to time.
BOARD
Means the Board of Trustees constituted under Sect
CONTRIBUTION
Means the sum of money payable to the institution by the employer.
EMPLOYEE
Means any person employed, whether directly or through any other person, for
wages or otherwise, to do any skilled or unskilled, supervisory, clerical, manual or
other work in, or in connection with the affairs of, an industry or establishment, under
a contract of service or apprenticeship, whether written or oral, express or implied,
and includes such person when laid off.
EMPLOYER
in relation to an industry or establishment, means any person who employs, either
directly or through any other person, any employee, and Includes--
(i) in the case of an individual, an heir, successor, administrator or assign;
(ii) a person who has ultimate control over the affairs of an industry or establishment,
or where the affairs of an industry or establishment are entrusted to any other person
(whether called a managing agent, managing Director, Manager, Superintendent,
Secretary.
EMPLOYMENT INJURY
MEANS a personal injury to an insured person caused by an accident, or by such
occupational disease as may be specified in the regulations, arising out of and in the
course of his employment; ) "industry" means any business, trade, undertaking,
manufacture or calling of employers, and includes any calling, service, employment,
handicraft, industrial occupation or avocation of workmen;
INSTITUTION
Means the Employees' Old-Age Benefit Institution established or nominated under
Section 4 or Section 5.
INSURED PERSON
Means an employee who is or was in insurable employment;
INSURABLE EMPLOYMENT
Means employment of a person under a contract of service or apprenticeship, whether
written or oral, express or implied and in respect of which contributions are payable
under this Act.
INVALIDITY
Means a condition, other than that caused by an employment injury, as a result of
which an insured person is permanently incapacitated to such an extent as to be
unable to earn from his usual or other occupation more than one-third of the normal
rates of earning in his usual occupation;
MEMBER
Means a member of the Board;
REGULATIONS
Mean regulations made by the Board;
WAGES
Means remuneration for services paid or payable in cash or in kind to an insured
person,
any sum paid to the employee to defray special expenses entailed by the nature of his
employment; or any gratuity payable on discharge, or any sum paid as bonus.
CHAPTER TWO
RESEARCH METHOD
&
PROCEDURE
RESEARCH DESIGN & METHODS
RESPONDENTS OF THE STUDY
RESEARCH INSTRUMENT
SOURCES OF DATA
TREATMENT OF DATA
PRESENTATION ANALYSISPRESENTATION ANALYSIS
RESEARCH DESIGN RESEARCH DESIGN AND MOTHODSAND MOTHODS
The research design is an exploratory as well as a theoretical in its framework with
data collected from both primary and secondary sources. The Internet and interviews
from the respondents of EOBI employees.
RESEARCH INSTRUMENTS:RESEARCH INSTRUMENTS:
The following instruments are being used to collect data for the study such as:
Interviews:
The data for the study has been collected from interviews of different EOBI
Employees as well as clients of EOBI. The method for collecting information is
basically Face to Face interview which is based on un - structure questions because it
can establish rapport and motivate respondents.
Questionnaires:
Questionnaire has also been designed for study. It’s an efficient data collection
mechanism to analyze the problems .100 copies were distributed to the respondents
belonging different EOBI Regional offices as well as head 0ffice and administered
personally.
Newspapers:
The data for the study has been collected from the Newspapers also. As it is an
important medium of data collection. Daily Dawn, weekly economic and Business
Review were very useful in the collection of data as it provided more important
information through the articles of various writers and predictors and its proved to be
quite helpful.
Internet:
Data for the study has also been gathered from another very important source that is
the internet. Much important information about the study was available through
internet like from the site of Employees old Age Benefit institution. was quite useful
in preparing the thesis.
Primary data:
The primary data of the project is collected from unstructured interviews and
structured questionnaire from the Director (public relation)of Employees old Age
benefit institution ,employees of EOBI ,investment center and from factories..
Secondary data:
The secondary data was collected from the published materials and related web sites
pages and website of Employees old benefit institution for support the study.
Newspaper’s like Daily Dawn. Its provide a lot of information regarding my interest
of study.
TREATMENT OF DATA:
The data retrieved from the questionnaire were carefully analyzed and organized
according to the criterion established in the instrument. Keeping in view, the nature of
data, Percentage (% ranking for he analysis of data is uses).
PRESENTATION ANALYSIS:
The presentation of data facts, figures and findings are shown by using:
Tables.
Pie- Charts.
CHAPTER THREECHAPTER THREE
Review of related Literature & StudiesReview of related Literature & Studies
Local Literature Local Literature
Foreign LiteratureForeign Literature
Areas for further studyAreas for further study
LOCAL LITERATURELOCAL LITERATURE
Various benefits that the labourers are entitled to, if provided with complete honesty
by the employers and the institutions concerned, can safeguard their rights to a great
extent. If all these ingredients are present in an industrial setup, the workers remain
satisfied and content in their job and can also make production more efficient.
All workers need to be provided old-age security after a lifetime of hard work. The
existing pension arrangements have been weak in terms of coverage and benefits.
These arrangements cover only a small segment of labor force in the public sector and
private sector establishments.
Employing more than 10 workers. A large majority of labor force working in trade,
agriculture, and informal sectors remains without old-age security. Public sector
pensions have been lucrative relative to wages, but wages have been very low.
These pensions are neither indexed nor bear any relation to government pay scales
after retirement. Pension revisions are discretionary and inadequate, and pensions
normally erode very quickly. The nascent private pension system is faced with a
number of problems, poor records, financial mismanagement and inefficiency, low
payouts, and harassment of employers and workers.
An over-centralized organizational structure, in EOBI as well as rigid, often
irrelevant, and unevenly enforced rules and mismanagement, result in delays in
responding to clients, due to employees & employers think that there is no need to
registration due to which collection is very low.
Most people are illiterate in Pakistan and for registration there are different
requirements there are different forms:
1) Employers registration ( PR-01)
2) Employees registration(PE-01)
3) For payment of contribution from employees and employers (PR-03)
So the both employees and employers neglect to registration. Forms have shown
below:
There is also inadequate cooperation between different, offices. Such problems create
problems not only for employees but also for employers and organizational
effectiveness.
Corruption within the institution is exist not only at higher level but also at middle and
lower level and is more evident in case of inefficiency and the management neglects
its duties and misuses its authorities.
Collection and payment of Pension to Employees During 1993-2004
At the end of year 2000, the EOBI had 43,560 employers, 1,572,014 insured
persons and 181,547 pensioners on its register. EOBI, coverage is simply inadequate
wherein only a minor fraction of total wage employees (estimated to be over 10
million) is covered. The number of beneficiaries is only a small proportion of the
covered workers (10.4 percent), although this number is growing at a much faster rate
(19.3 percent p.a) than the growth rate of the number of person entering the scheme
about (10 percent p.a) .
TABLE # 1
Comparative statement for 02.05.02 To 20.05.05
This slow growth is due to employer’s evasion of paying contribution as well as low
employment growth in formal sector. However, this generates a sustainability
problem for EOBI because benefit outgo is higher than the increments in contribution.
DIFFERENT PRACTICES IN ENTERPRISESDIFFERENT PRACTICES IN ENTERPRISES
In many private enterprises, labour is hired on a contract basis and stays only for three
to four months. With the completion of the assignment, existing workers are laid off
and new labour is hired for the next order. This short period of work does not allow
the labourers to become eligible for any type of benefit as three months are usually
taken as the probation period before a worker can be made permanent. Due to these
unfair terms of hiring, social security and EOBI benefits are also evaded.
Where an enterprise hires 10 or more workers, it commonly starts portraying itself as
several small enterprises with different owners, each having 8 or fewer workers.
Building two-feet-high walls to make partitions within the establishment usually
serves this purpose and enables the enterprise to hide its true scale.
Other systems devised o escape contribution to the welfare institutions are of
changing surnames of workers in the record every three to four months to show the
Labour Department that new labour has been hired. However, the same labour
continues to work at the enterprise, often for five to six years. Contribution to EOBI is
also avoided by simply not registering half of the employees for benefits: throughout
their careers, the employers send no contribution on their behalf and once they reach
the age of retirement (55-60 years), they are laid off. There have been many instances
where trade unions seeking to contribute in welfare funds had records opened and
found that many workers serving the enterprise had had no secure future and were not
even aware of this.
Since the inception of privatisation of industries, new owners of privatised units have
been insisting on laying off all labour and bringing newly hired workers on their own
terms. A major reason for this action is quoted by many as the exposure of old labour
to benefits and the formation of labour unions when the industry was in state control.
As the new owners are neither interested in providing all the benefits to workers nor
bear the presence of labour unions that can create unrest, they bring new labour on
their own terms.
EOBI Institution experiences administrative problems in record keeping and in
identifying defaulters and enforcing payment. Because employees don’t want to pay
contribution they don’t give importance pension after retirement.
Similarly, registration of employers with the EOBI stood lesser at 600 and there was
also a decline in the number of insured persons to 58,960 compared to 84,411 insured
in the corresponding period of last year.
The major reasons for decrease in registration of employers were saturation level
achieved by map-survey and the condition of simultaneous registration of insured
persons for the purpose of record keeping.
EOBI Institution experiences administrative problems in record keeping and in
identifying defaulters and enforcing payment. Because employees don’t want to pay
contribution they don’t give importance pension after retirement.
The government was paying Rs160 million to EOBI pensioners while the collection
was Rs20 million. The low collection is due to
the following reasons:
i) the government withdrew its contribution from July 1995, which impaired the long-
term solvency of the fund
ii) and also some employers are trying not to register their employees with EOBI.
In other countries, where employees and sometimes government itself contributes to
employees’ old age benefits and social security institutions to share the burden of the
employers, in Pakistan, it is the employer alone who has to contribute to these
institutions. This lack of support from the government compels him to find ways of
escape.
There is also another problem that the majority of laborers are not aware of all the
labor laws and how they can benefit from them. They have to be made aware through
awareness campaigns. They can be educated by establishing more departments such
as the Directorate of Labor Education. Making this information so common that every
worker is enlightened about his/her rights is the need of the hour. The mass media that
frequently reach the working class, including radio, newspaper and television, can be
effectively put to use by telling workers how they can register for benefits.
EOBI is not achieving its goals effectively & efficiently. Its covering is quite less as
compared to a 40 million labor force in the country as it was less than 5 percent.
INSUFFICIENT PENSIONINSUFFICIENT PENSION
After retirement employees face further threats to their income security. Pension
benefits are not systematically increased for inflation. While retirees typically receive
only half of their pensions in annuity.
The benefits are given by EOBI to ensure that the workers are financially secure when
they retire or if they become invalid before retirement. But basically it does not
financially secure to workers because it is very low compare to daily expenditures.
Pension provided by EOBI is insufficient due to which employee does not secure after
retirement because pension benefits are not systematically increased for inflation.
The amendment was to increase the pension but after announcement of amendment
there is no increase in the pension till now. President General Pervez Musharraf has
done the right thing by announcing an increase in the minimum monthly pension for
workers, from Rs. 700 to Rs. 1,000, under the Employees Old age Benefit Institute
(EOBI). Although too little in comparison to the big and bold official claims of deep
gains on the macroeconomic front, the raise is a step in the right direction that will
help alleviate the financial woes of retired workers to some extent.
President Pervez Musharraf had announced increase of minimum pension to Rs1,000
per month. However, as per EOBI Act, minimum pension could be enhanced after
actuarial valuation.
FOREIGN LITERATURE FOREIGN LITERATURE
The employee bears the Pension plans come in two basic forms. Defined benefit plans
provide retirement benefits where the employer promises to pay retirees a pension in a
specific amount, with the monthly benefit set by a formula of years of service times
final average salary times a percentage figure. The employer must contribute enough
money to the plan on a regular basis so that there is enough money available to pay
the pension benefits of all the retired employees as they come due.
Another way of saying this is that the employer bears the risk if the funds it pays into
the plan and the investment income earned on those funds are not sufficient to pay the
pensions.
Defined contribution plans provide that the employer will contribute an amount into
the plan on behalf of an employee with the employee typically required to also
contribute, with each employee having her own individual account. The employee
will have available at retirement the amount of money that is in her account at the
time of retirement, "what you see in the account is what you get." This means that
investment risk for her individual account.
Artic cal on pensions
Pension schemes (including invalidity and survivors', as well as retirement, benefits)
which require mandatory participation by workers. On the benefit side it also includes
social assistance to the elderly, and on the revenue side pension schemes financed
from general taxation as well as from earmarked social security contributions. Private
pension schemes in which participation is voluntary are given a much slighter
treatment, and are referred to only in so far as they supplement social security pension
schemes. But these are not hard and fast definitions and, as the book itself shows,
there are many areas where public social security schemes and private and/or personal
pension or savings schemes interact, and cannot be considered one without the other.
At the beginning of the last century few workers possessed the security of an old age
pension. In the developed countries most either died early or worked until they were
in their late sixties, spent a brief retirement living with their children, then died in
their early seventies. To be old generally meant to be poor. Being disabled signified
that poverty began earlier. To survive the wage earner implied that poverty lasted
longer. No support from children meant being thrown back on charity or minimal
public support. For developing and middle-income countries matters were a great deal
worse: incomes were substantially closer to subsistence levels and the capacity of
children to support their parents was less: death came earlier: life was nasty, brutish
and short. But by the beginning of the 21st century the situation has dramatically
changed. In developed countries the incidence of poverty in old age is now at
comparable levels to that in the remainder of the population. Life expectancy is longer
and most workers can expect a significant period of retirement with a reasonable
income. Disability pensions and the possibility of early retirement have reduced the
financial risks of incapacity to work. Almost all women are entitled to a survivor's
pension, and growing majorities are entitled to a pension as workers in their own
right. Alongside these changes, an increasing number of developing countries are
beginning to emulate the experience of the developed countries, in terms of the
extension of coverage and in the improvement of benefits.
In China, the government is planning to introduce major reforms to pension schemes,
as well as to employment injury insurance, unemployment compensation and health
care. After decades of discussion, Thailand is establishing a social security pension
scheme for employees. A number of countries in Africa, are converting national
provident funds into pension schemes, and partial conversion has been implemented
in India, and is also under consideration in Malaysia. Conversely, in Latin America
many countries are contemplating a change to privately-managed pension schemes
based on individual accounts.
Public and non-public pension programmes
In many developing countries, the social security retirement benefit programme
provides benefits to only a small fraction of the population, primarily upper-income
urban workers. For most workers, there is no public-private mix. There is only private
provision for consumption in old age, which occurs through work, transfers from
other family members, and support from charities and other non-governmental
organizations. In some countries, low coverage is the result of widespread
contribution avasion. In developed countries, for the bottom 40 per cent of the income
distribution, retirement income is provided almost exclusively by the public sector
through social security retirement, disability and social assistance benefits. In these
countries, the top 60 per cent of the income distribution also finance retirement
consumption through private savings, occupational pensions and work.
The financing of pension programmes
In most countries, social security retirement benefits are financed through
contributions by both workers and employers. Generally, employers finance 50 per
cent or more of contributions in defined benefit schemes, but in many defined
contribution schemes workers provide all the financing. In many countries the
government provides partial financing out of general tax revenues, it being considered
fair that the government, employers and workers share in financing social security
retirement benefits. The government's share can be determined by a formula or can be
a back-up source to cover deficits. To encourage coverage through voluntary
compliance by self-employed workers, and even in some cases to encourage self-
employment, those workers have generally been charged a lower rate than the total
rate charged to employees and employers. Numerous countries, however, charge self-
employed workers a rate equal to the sum of the worker and employer rate on the
theory that ultimately employees bear through reduced pay the rate paid by the
employer, and thus self-employed workers should also bear the full rate.
Governance and administration
The overall performance of social security pension schemes in many countries has
been disappointing. This is attributable to a broad range of problems some of which
are outside the control of the social security administration. Some, however, reflect
mismanagement, or are due to weaknesses in the design of the scheme. Good
governance is the key to an effective social security scheme, but it is essential to be
clear as to what this term means. The definition used here is broad and embraces the
processes of consultation and decision making, the institutional arrangements, and the
managerial and administrative functions relating to the implementation and
supervision of social security schemes. It is also concerned with the interrelationship
between national policy, national management and scheme management. Many
countries have had problems with poor functioning of their social security schemes.
Frequently, these problems are due to poor governance. Sometimes they arise because
of politicization of the social security institution. Sometimes they result from the poor
design of administrative procedures, or the benefit formula. Poor governance in some
countries results in high administrative costs and poor service. These issues of
coverage and governance are primarily relevant for developing countries because
developed countries generally have high coverage and are fairly well governed.
Areas for the Further Studies
There are many outcomes from this research which may be use for further study. As
this research is base on the inefficiency of EOBI and problems faced by EOBI due to
which it is it viable and credible.hi.This research identifies many private enterprises
practices due to which EOBI could not cover more labor to provide benefits.
CHAPTER FOURCHAPTER FOUR
PRESENTATION ANALYSISPRESENTATION ANALYSIS
Presentation Analysis
This chapter includes a final presentation of facts collect through the survey
conducted from the EOBI employees & the interview from the organization
representatives in the form of tables and graphs and their interpretations.
Frequency and percentage distribution of response of SurveyFrequency and percentage distribution of response of Survey
TABLE # 2
Total Number of Total Number of
SurveySurvey
StatusStatus FrequencyFrequency PercentagePercentage
100100 Response of Response of
SurveySurvey
8080 80%80%
No Response of No Response of
SurveySurvey
2020 20%20%
Figure #1
COMMENTS:
The above figures and graphical representation simply representing the number of
People who has responded to the survey and those who do not response. Hundred
(100) People were asked for the survey but out of them eighty (80) People have
responded and twenty (20) have not.
Frequency and percentage distribution regarding the response ofFrequency and percentage distribution regarding the response of
survey from different areas of the citysurvey from different areas of the city
Response of Survey
80%
20%
Response of Survey No Response of Survey
TABLE # 3
Total Number ofTotal Number of
Response of theResponse of the
SurveySurvey
Areas of SurveyAreas of Survey FrequencyFrequency PercentagePercentage
8080 Regional Regional
officeLandi officeLandi
2525 31.25%31.25%
Head office EOBIHead office EOBI
P.E.C.H.SP.E.C.H.S
3030 37.5%37.5%
Zonal OfficeZonal Office
P.E.C.H.SP.E.C.H.S
2525 31.25%31.25%
TOTALTOTAL 8080 100%100%
Figure #2
COMMENTS:
The above figures and graphical representation simply representing the response of
the Not only of EOBI employees but Also EOBI clients like school staff from
different areas of the city of Karachi. The responses from Malir Halt, P.E.C.H.S Head
office, Natha khan are moderate but the response from Zonal office P.E.C.H.S
is Very low. Overall the survey has been conducted from the main areas of city and
the response from the respondent is excellent which has helped in the analysis of
better result for the research.
Frequency and percentage about problems faced by EOBIFrequency and percentage about problems faced by EOBI
TABLE # 4
Responses Frequency Percentage Rank
Yes 70 87.5% 1
No 10 12.5% 280 100%
Figure #3
COMMENTS:
The above figure and graphical representation simply representing the problems faced
by EOBI. Out of eighty (80) 87.5% (70) told that there are some problems due to
which EOBI is covering less %age of total labor Force .problems are no coordination
from employers, they hire labor on contract and does register them and fire them
before they become eligible for pension.
Frequency and percentage about problemsFrequency and percentage about problems
TABLE # 5
Responses Frequency Percentage Rank
Record keeping 30 37.5% 1
Identify defaulters
40 50% 2
Above two problems
10 12.5% 3
80 100%
Figure #4
COMMENTS:
The graphical representation show that the main problems faced by EOBI are
identifying defaulters and poor record keeping because work is done manually due to
which EOBI Face problems in not only identifying employers but also employees.
40 % told that EOBI face problems in identifying defaulters who don’t deposit
regularly monthly contribution in EOBI account. This problem arises when employers
hire labors on contract basis and then they don’t register them. Remaining 10% told
that all these problems exist within the organization.
Frequency and percentage about Employees Job satisfaction
TABLE # 6
Responses Frequency Percentage Rank
Yes 68 85% 1
No 12 15% 280 100%
Figure #5
COMMENTS:
The above figure and graphical representation show the employees satisfaction
whether they are satisfied with their jobs are not. If employees are satisfied with their
jobs then they will be productive. Sixty eight (68) 85% said that they are satisfied
with their jobs and remaining twelve (12) 15% said that they low satisfied.
Frequency and percentage about Reward system
TABLE # 7
Responses Frequency Percentage Rank
Rewards 20 25% 1Promotion 25 31.25% 2None 35 43.75% 3
80 100%
Figure #6
COMMENTS:
The above figures and graphical representation simply representing the reward system
whether EOBI has or not reward system .organizations use rewards to induce people
remain with the organization to achieve its objectives .
25% Employees told that they provide cash rewards on excellent performance and
15% told that they promote there employees when that perform well and remaining
44% think that that they don’t provide rewards.
Frequency and percentage about AwarenessFrequency and percentage about Awareness
TABLE # 8
Responses Frequency Percentage Rank
Yes 2 20% 1
No 8 80% 210 100%
Figure #7
COMMENTS:
The above figure and graphical representation simply representing the Awareness of
clients. The survey also was done to know the awareness about EOBI & questions
were asked form teachers of New Rehbar School which is located in Nathah
khan .Out of ten (10) clients 80% (8) said that they don’t know about EOBI, to whom
it provides benefits and when it provide Remaining 20%(2) said that thy know there is
a welfare scheme for Old Age benefits but they don’t want to register themselves
because there are a lot of formalities and it takes time.
CHAPTER 5CHAPTER 5
SUMMARY OF FINDINGS, CONCLUSION &SUMMARY OF FINDINGS, CONCLUSION &
RECOMMENDATIONSRECOMMENDATIONS
Summary of Findings
This chapter includes Findings, Conclusions and Recommendations
Following are the findings of research conducted interview and survey.
80% employees(EOBI)have responded to the survey positively
The response from Malir Halt, P.E.C.H.S Head office, Natha khan are
moderate but the response from Zonal office P.E.C.H.S is Very low.
Out of ten (10) clients 80% (8) said that they don’t know about EOBI, and 20
%( 2) said that thy know there is a welfare scheme for Old Age benefits.
Out of eighty (80) 87.5% (70) told that there are some problems due to which
EOBI is covering less %age of total labor Force .
25% Employees told that they provide cash rewards on excellent performance
and 15% told that they promote there employees when that perform well and
remaining 44% think that that they don’t provide rewards.
40 % told that EOBI face problems in identifying defaulters who don’t deposit
regularly monthly contribution in EOBI account. This problem arises when
employers hire labors on contract basis and then they don’t register them.
Remaining 10% told that all these problems exist within the organization.
CCONCLUSIONSONCLUSIONS D DRAWNRAWN
After manipulating and analyzing the data, with respect to the above findings,
following are the conclusions drawn from the findings.
Old age benefits institution is established to share the burden of the
employers, in Pakistan, it is the employer alone who has to contribute to these
institutions. This lack of support from the government compels him to find
ways of escape.
Contribution to EOBI is also avoided by simply not registering half of the
employees for benefits: throughout their careers, the employers send no
contribution on their behalf and once they reach the age of retirement (55-60
years), they are laid off.
Many private enterprises, hire labour on a contract basis and stays only for
three to four months. With the completion of the assignment, existing workers
are laid off and new labour is hired for the next order. This short period of
work does not allow the labourers to become eligible for any type of benefit
as three months are usually taken as the probation period before a worker can
be made permanent. Due to these unfair terms of hiring, social security and
EOBI benefits are also evaded.
Many enterprises change surnames of workers in the record every three to
four months to show the Labour Department that new labour has been hired.
However, the same labour continues to work at the enterprise, often for five to
six years.
EOBI Institution experiences administrative problems in record keeping and
in identifying defaulters and enforcing payment. Because employees don’t
want to pay contribution they don’t give importance pension after retirement
RECOMMENDATIONSRECOMMENDATIONS
Improve registration record of employers, employees, contributions and supply
computer-generated ledger of Accounts periodically for reconciliation and
confirmation.
Improve record keeping through computerization to reduce compliance cost.
Improving accountability and performance. Training at all levels shall be enshrined in
the culture of the organization.
Close monitoring, supervision and audit.
Awareness among workers about their rights, due benefits and labor laws can play a
significant role in reducing anti-welfare activities within the welfare institutions. The
majority of laborers are not aware of all the labors laws and how they can benefit
from them. Awareness could be through media including radio, newspapers, and
television and workers can know how they can register for benefits.
REFRENCESREFRENCES ANDAND BIBLIOGRAPHYBIBLIOGRAPHY
http://www.eobi.gov.pk/introduction/introduction-main.html.
EOBI receives Rs1.195 billion contribution 28 January 2005 Dawn News.
Article on “Evaluation of social safety nets in pakistan and types of social
safety nets”By Hafiz A. Pasha,Sumaira Jafarey,Hari Ram Lohano
Article on “Too little, but right” announcement of Increasing pension by
announced by President Pervez Musharraf.
http://malumaat.com/vepaar/category.php. “EOBI adopts accrual accounting
system”.
Poverty and Social Safety Nets: A Case Study of Pakistan by MOHAMMAD
IRFAN Former Joint Director Pakistan Institute of Development Economics.
Employees' Old Age Benefits By SYED SAAD HUSSAIN ,Dec 25 - 31, 2000.
The Goal of Workers’ Welfare and Policy Challenges BY Maliha Shamim,
February 2003.
www.google.com
www.yahoo.com
http://www.eobi.gov.pk
http://www.jang.com.pk
http://www.jang-group.com
http://www.adb.org/Evaluation/reports.asp
http://searchco.com/
Interviews & Surveys
This Questionnaire has designed to discover the problem areas of EOBI and its weakness and to understand why it is
not progressive.
1) What is EOBI?
2) What are the functions of EOBI?
3) What is the procedure that employees & employers follow to fulfill
requirements.
4) Is it profitable government organizations in Pakistan?
5) What types of organizations are covered by EOBI?
6) Kindly tell me about the organization structure?
7) How does information flow in your organization?
8) Is it only for private sector?
9) Who pays the contribution?
10) Does government provides fund?
11) How EOBI scheme is financed?
12) How & where the funds are invested?
13) Does the contribution rate change due to increase in pensions expenditures?
14) What is the current monthly minimum & maximum pension?
15) Do you think that the rules of pension application to federal or provisional
government employees and to bank employees are different?
16) What is the rate of labor force in Pakistan is covered by EOBI?
17) Do you think there is a need for increasing awareness about the scheme
offered by E.O.B.I.?
18) What was further amendment in Employees' Old-age Benefits Ordinance in, 2002?
19) Are you happy with the efficiency of your staff?
20) Does your organization provides any of the following a job well done by
employees?
Rewards
Awards
Appraisal
Promotion
None
21) What are the major problems the EOBI scheme faces?
22) Do you face problems in record keeping & identifying defaulters & enforcing
payment?
23) Please shed light on the weakness in EOBI system?
24) Any other comments
______________________________________________________________
Name ---------------------------------------------------
Designation-------------------------------------------
This Questionnaire is designed to check the job satisfaction and
dissatisfaction of EOBI Employees.
1) What types of organizations are covered by EOBI?
o Private organizations
o Government organizations
o Both
Are you satisfied with the current setup of the EOBI?
o Very much
o Quite satisfied
o Not really
2) Do you get salary on time?
o Always
o Sometimes
o Never
3) What is the attitude of the management towards the employees?
a. Good
b. Average
c. Bad
4) Does your organization provides any of the following a job well done?
a. Rewards
b. Awards
c. Promotion
d. None
5) How does information flow in your organization?
Open
Close
6)What are the major problems the EOBI scheme faces?
Record keeping
Corruption
Identifying defaulters
Above three problems
None of them
7)Please shed light on the weakness in EOBI system?
_________________________________________________________
THANKS FOR YOUR COOPERATION