SYSTEM FAILURE IN EMPLOYEES OLD AGE BENEFIT INSTITUTION

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A thesis Presented to the faculty of Management sciences Bahria Institute of Management & Computer Sciences, Karachi

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In partial fulfillment of the Requirement for the Degree Master in Business Administration

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By

ABDUL WAHEED
May 2005

BAHRIA UNIVERSITY INSTITUTE 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.

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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.

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BAHRIA UNIVERSITY INSTITUTE OF MANAGEMENT & COMPUTER SCIENCES KARACHI

Project/ thesis System Failure in Employees Old Age Benefit Institution Date: ______________

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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
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Approved by the committee on Oral Examination with a grade of _______________ ________________________ Chairman ______________________ _______________________ _______________________ Member Member Member

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ABSTRACT
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. Its 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 dont want to pay contribution they dont 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% dont 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 dont 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.

ACKNOWLEDGMENT

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

AM TODAY.

DEDICATION
I would like to dedicate my thesis to my parents.

TABLE OF CONTENTS
Description Page No 1 8 8 8 8 9

Chapter 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

Chapter Two: Research Method & Procedure

Research Design & Methods Sources of Data Treatment of the Data Presentation Analysis

12 13 13 13

Chapter Three: Review of related literature & Studies

Local Literature Collection and payment of Pension to Employees During 19932004 DIFFERENT PRACTICES IN NTERPRISES INSUFFICIENT PENSION Foreign Literature Artic cal on pensions Areas for the Further Studies

14 15 19 21 22 23 23 26

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 29 31 32 33 34 35

CHAPTER FIVE: Summary of Findings, Conclusion & Recommendations. Research Findings Conclusion Drawn Recommendations References and Bibliography 36 37 39 40

CHAPTER ONE

STATEMENT OF PROBLEM & ITS BACKGROUND

INTRODUCTION STATEMENT OF PROBLEM SIGNIFICANCE OF STUDY SCOPE & DELIMITATION DEFINITIONS

INTRODUCTION
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 oldage 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.

VALUES
Transparency Trust Team work Integrity Professionalism Meritocracy Courtesy Fairness

OBJECTIVES
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.

FUNCTIONS
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 PLAN
Key activities of EOBI are enumerated below: Registration of employers; Registration of employees; Collection of Contribution; Distribution of Benefits.

STATEMENT 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.

ASSUMPTIONS TO THE OBJECTIVE

EOBI is located in Karachi. There is no corruption in EOBI. Qualified management. Minimum pension is Rs700.

SIGNIFICANCE 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.

SCOPE
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 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 ANALYSIS

RESEARCH DESIGN AND 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:
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. Its 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. Newspapers 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 THREE Review of related Literature & Studies Local Literature Foreign Literature

Areas for further study

 LOCAL 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
A c t ivit ie s 0 2 .0 5 .0 2 2 0 .0 5 .0 5 c h a n g e % R e g is t ra t io n o f E m p lo y e rs 4 6 ,6 4 4 5 3 ,9 0 5 1 5 .5 6 R e g is t ra t io n o f E m p lo y e e s1 7 , 4 3 , 7 6 8 2 , 1 9 2 , 2 2 7 2 5 . 7 2 C o n t rib u t io n C o lle c t io n (in m 1illio5n1)5 . 5 1 2 3 , 3 6 6 . 0 4 4 1 . 4 8 6,

This slow growth is due to employers 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 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 dont want to pay contribution they dont 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 dont want to pay contribution they dont 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 longterm 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 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
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 selfemployment, those workers have generally been charged a lower rate than the total rate charged to employees and employers. Numerous countries, however, charge selfemployed 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 FOUR PRESENTATION 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 Survey

TABLE # 2

Total Number of Survey 100

Status Response of Survey No Response of Survey

Frequency 80 20

Percentage 80% 20%

Figure #1
Response of Survey
20%

80%

R esponse of Surv ey

N R o esponse of Surv ey

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 of survey from different areas of the city
TABLE # 3

Total Number of Areas of Survey Response of the Survey 80 Regional officeLandi Head office EOBI P.E.C.H.S Zonal Office P.E.C.H.S TOTAL

Frequency

Percentage

25 30 25 80

31.25% 37.5% 31.25% 100%

Figure #2
Regonal office Landi, 31.25% Head Office P.E.C.H.S, 37.50%

Zonal office P.E.C.H.S, 31.25%

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 EOBI

TABLE # 4 Responses Yes No Frequency 70 10 80 Percentage 87.5% 12.5% 100% Rank 1 2

Figure #3

No, 12.50%

Yes, 87.50% Yes No

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 problems

TABLE # 5

Responses Record keeping Identify defaulters

Frequency 30 40

Percentage 37.5% 50%

Rank 1 2

Above two problems

10 80

12.5% 100% Figure #4

All two problem s, 12.50%

Record keeping, 37.5% Identify defaulters, 40%

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 dont deposit regularly monthly contribution in EOBI account. This problem arises when employers hire labors on contract basis and then they dont register them. Remaining 10% told that all these problems exist within the organization.

Frequency and percentage about Employees Job satisfaction

TABLE # 6 Responses Yes No Frequency 68 12 80 Percentage 85% 15% 100% Rank 1 2

Figure #5
No, 15%

yes No yes, 85%

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 Rewards Promotion None Frequency 20 25 35 80 Percentage 25% 31.25% 43.75% 100% Rank 1 2 3

Figure #6

Prom otion, 15%

Rewards, 25%

None, 44%

Rewards

Prom otion

None

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 dont provide rewards.

Frequency and percentage about Awareness

TABLE # 8 Responses Yes No Frequency 2 8 10 Percentage 20% 80% 100% Rank 1 2

Figure #7

No, 80.00%

Yes, 20.00%

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 dont 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 dont want to register themselves because there are a lot of formalities and it takes time.

CHAPTER 5 SUMMARY OF FINDINGS, CONCLUSION & RECOMMENDATIONS

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 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 dont 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 dont provide rewards. 40 % told that EOBI face problems in identifying defaulters who dont deposit regularly monthly contribution in EOBI account. This problem arises when employers hire labors on contract basis and then they dont register them. Remaining 10% told that all these problems exist within the organization. are

CONCLUSIONS DRAWN
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 dont want to pay contribution they dont give importance pension after retirement

RECOMMENDATIONS

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.

REFRENCES AND BIBLIOGRAPHY

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 netsBy 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