To calculate EOBI contributions, both employers and employees contribute a percentage of the government-mandated minimum wage, ensuring a social safety net for workers in Pakistan.
The Employees' Old-Age Benefits Institution (EOBI) is a social insurance program in Pakistan designed to provide financial security to employees in their old age, in case of invalidity, or to their survivors. Understanding how these contributions are calculated is crucial for both businesses and employees to ensure compliance and benefit eligibility.
Understanding EOBI Contributions
EOBI contributions are based on the minimum wages declared by the Government of Pakistan. These contributions are mandatory for applicable industrial and commercial organizations. The contribution rates are fixed percentages of this minimum wage, rather than an employee's actual salary, which simplifies the calculation process.
Who Contributes?
Both the employer and the employee are required to make monthly contributions:
- Employer Contribution: This is the larger portion, paid by the organization employing the individuals.
- Employee Contribution: A smaller percentage deducted from the employee's salary and remitted by the employer along with their own contribution.
EOBI Contribution Rates
The contribution rates are clearly defined as follows:
| Contributor | Percentage of Minimum Wages |
|---|---|
| Employer | 5% |
| Employee | 1% |
Total Contribution: The combined contribution for each eligible employee is 6% of the minimum wages.
Practical Calculation Example
Let's assume the minimum wage declared by the Government of Pakistan is PKR 32,000 per month (this figure is illustrative and changes periodically; always refer to the latest government notification).
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Employer's Share Calculation:
5% of PKR 32,000 = 0.05 * 32,000 = PKR 1,600- The employer contributes PKR 1,600 for each eligible employee.
-
Employee's Share Calculation:
1% of PKR 32,000 = 0.01 * 32,000 = PKR 320- The employee contributes PKR 320, which is deducted from their salary.
-
Total Monthly EOBI Contribution per Employee:
PKR 1,600 (Employer) + PKR 320 (Employee) = PKR 1,920- The employer remits a total of PKR 1,920 to EOBI for each eligible employee every month.
It's important to note that these contributions are calculated on the minimum wage, regardless of an employee's actual higher salary.
Scope of Applicability
The EOBI Act is applicable to all industrial and commercial organizations meeting specific criteria. This typically includes establishments with a certain number of employees (often 5 or more, though this can vary and should be confirmed with the latest regulations). Both permanent and contractual employees within these organizations are generally covered, ensuring broad social protection.
Key Aspects to Remember:
- Minimum Wage: Always use the current minimum wage rate notified by the government for accurate calculations. This rate is subject to change, typically annually.
- Registration: Employers must register their organization and eligible employees with EOBI.
- Timely Payments: Contributions must be remitted to EOBI monthly by a specific deadline to avoid penalties and ensure employee benefits accrue correctly.
- Record Keeping: Maintaining accurate records of contributions and employee data is essential for compliance and future claims.
For the most up-to-date information on minimum wages and EOBI regulations, employers and employees should always consult the official EOBI website or relevant government labor department notifications.
