““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