Issues of Non-Contributing Gap & Management at E.O.B.I: A Case of Largest Pension Fund of Pakistan

Abstract

The nascent private pension system is faced with several problems, poor records, financial mismanagement and inefficiency, low payouts. An over-centralized organizational structure, in EOBI as well as rigid, often irrelevant, and unevenly enforced rules and mismanagement, resulting 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, labor 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 labor is hired for the next order. This short period of work does not allow the laborers 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 privatization of industries, new owners of privatized units have been insisting on laying off all labor 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 a contribution, they don’t give importance pension after retirement. There is also another problem that most 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 provides. 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 the registration record of employers, employees, contributions would help to make EOBI progressive and actuarial Valuation to be made every three years.