EMPLOYEES' OLD‑AGE BENEFITS ACT, 1976

Act No. XIV of 1976

 

[April, 15, 1976]

 

An Act

to repeal and re‑enact the law relating to old‑age benefits for the persons employed in industrial, commercial and other organisations.

 

CHAPTER I

 

PRELIMINARY

 

2. Definition.‑‑ In this Act unless the context otherwise requires:‑‑

 

(Cl. (a) added after re‑numbering original cl. (a) as (aa) by Ord. XVII of 1983, s. 3, enforced from 1st July, 1983=1983 PLS 81.)[(a) "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];

 

(Original cl. (a) re‑numbered as (aa), ibid.) [(aa)] "board" means the Board of Trustees constituted under section 7;

 

(b) "contribution" means the sum of money payable to the Institution by the employer (Added by Finance Act, 1986 (Act I of 1986), s. 11(1)(a): Gaz. of Pak., Extr., Pt. I, June 29, 1986.) [or by the Federal Government] in respect of an insured person under the provisions of this Act.

 

(Cl. (bb) added by Ord. XVII of 1983 s. 3.) [(bb) "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]:

 

(Omitted first proviso of cl.(bb) by the Labour Law (Amendment) Act, 1994 (Act XI of 1994), s. 8(1)(a); Gaz. of Pak. Extr. Pt. I, June 29, 1994, p. 224‑25. [First proviso 6 was added by Act I of 1986, s. 11(1)(b)])[*       *          *          *            *          *          *          *]

 

Provided (Omitted word "further" in the second proviso, ibid, s. 8(1)(b).) [ * * * ] that a director of a limited company or of a corporation set up under any law shall not be treated as an employee under this Act, irrespective of his wages or emoluments];

 

(Subs. cl. (c) by Ord. XVII of 1983, s. 3.) [(c) "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 are entrusted to any person (whether called a managing agent, managing director, manager, superintendent, secretary or by any other name), such other person; and

 

(Omitted sub‑clause (iii) by Finance Act, 1986 (Act I of 1986), s. 11(1)(c); Gaz. of Pak., Extr., Pt. I, June 29, 1986.) [ *            *          *          *          *          *          *]

 

(d) "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.

 

(Cl. (e) subs. by Ord. XVII of 1983, s. 4=1983 PLS 81)[(e) "establishment" means‑‑

 

(i) an establishment to which the West Pakistan Shops and Establishment Ordinance, 1969 (West Pakistan Ordinance No. VIII of 1969), for the time being applies, and, notwithstanding anything contained in section 5 thereof, includes clubs, hostels, organisations and messes, not maintained for profit or gain of establishments, including hospitals, for the treatment of care of sick, infirm, destitute or mentally unfit persons;

 

(ii) a construction industry, as defined in the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (West Pakistan Ordinance No. VI of 1968);

 

(iii) a factory as defined in the Factories Act, 1934 (XXV of 1934);

 

(iv) a mine as defined in the Mines Act, 1923 (IV of 1923);

 

(v) a road transport service as defined in the Road Transport Workers Ordinance, 1961 (XXVIII of 1961); and includes any class of industries or establishments which the Federal Government may, by notification in the official Gazette, declare to be establishments for the purposes of this Act].

 

(f) "fund" means the Employees Old‑Age Benefits Fund set up under section 17;

 

(g) "industry" means any business, trade, undertaking, manufacture or calling of employers, and includes any calling service, employment, handicraft, industrial occupation or avocation of workmen;

 

(h) "Institution" means the Employees' Old‑Age Benefits Institution established or nominated under section 4 (Words and figures added, ibid.) [or section 5];

 

(i) "insured person" means (Words and figures added, ibid.) [an employee] who is or was in insurable employment;

 

(j) "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;

 

(k) "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.

 

(l) "member" means a member of the Board;

 

(m) "prescribed" means prescribed by rules;

 

(n) "regulations" means regulations made by the Board.

 

(o) "rules" means rules made under this Act;

 

(Inserted clause (oa) by the Labour Laws (Amendment) Ordinance, 2001 (Ord. LIII of 2001), s. 7(2), (effective retrospectively from July 1, 2001); Gaz. of Pak. Extr. Pt. I. October 6, 2001, p. 1475‑1481. [See also EASTERN WORKER, Vol. 41, No. 5, Sept.‑Oct., 2001, p. 7‑19].)[(oa) "self assessment scheme" means a self assessment scheme according to which no inspection shall be made under sub‑section (1) of section 12 for a period of two years;]

 

(Clauses (p) and (q) subs. by Ord. XVII of 1983, s. 4=1983 PLS 81.) [(p) "wages" means. remuneration for services paid or payable in cash or in kind to an insured person, not being less than the remuneration based on the minimum rates of wages declared under the Minimum Wages Ordinance, 1961 (XXXIX of 1961), without taking account of deductions for any purpose, under a contract of service or apprenticeship, express or implied, and shall be deemed to include any dearness allowance or other addition in respect of the cost of living, and any payment by the employer to an insured person in respect of any period of authorised leave, illegal lock‑out or legal strike, but does not include ‑

 

(i) any payment for overtime, or

 

(ii) any sum paid to the employee to defray special expenses entailed by the nature of his employment, or

 

(iii) any gratuity payable on discharge, or

 

(iv) any sum paid as bonus, and

 

(q) "year" with respect to insurable employment, means a total of three hundred and sixty‑five days for which contributions are payable, or in the case of insured persons, who are not paid for weekly holidays, a minimum of three hundred and twelve days.]

 

The Act becomes applicable in three ways: (i) employer must register with the Institution if he either directly or indirectly (through a contractor) employs ten or more persons on any day during the preceding twelve months; (ii) by voluntary application even if the number of employees are less than ten; and (iii) if employer escapes the applicability of the Act by the above two methods, even then the Federal Government can apply the Act through a notification in an Official Gazette.

 

It is the responsibility of an employer to ensure whether the Act is applicable or not. Once the Act becomes applicable, it will remain applicable even if the number of employees falls below ten any time in future.

 

Sec. 2(bb). "employee"‑‑

 

            The definition of "employee" is comprehensive and cover employment of every type and kind including part‑time employees of an establishment who worked even twice a week. Held, number of working hours/days simipliciter, for which a person is engaged in an establishment/industry, by employer is not a test to determine his status as employee under definition clause. Mere fact that disputed employees were working on part‑time basis could not be a valid reason for excluding them from category of employees as envisaged by S. 2(bb) of Act. [S.C. (Pak): Lahore Race Club vs. Deputy Director, EOBI; PLJ 1998 SC 1728 = 1998 SCMR 1571].

 

From the above judgement that a requirement of ten or more persons, as stated in section 1(4) (i) when the Act becomes applicable, does not necessarily mean full‑time employees but the total of ten could comprise of full‑time as well as part‑time employees who may be working few hours/days in a week to half‑time.

 

Persons in Managerial and Administrative Capacity‑

 

The scope of the law was considerably expanded in 1994 to include managerial and administrative staff within the definition of an "employee" for the purposes of this Act.

 

The second proviso in the definition of an "employee", before 1994 Amendment, stated that persons "employed mainly in managerial or administrative capacity or a person possessing professional degrees, fellowship or membership of a recognised university or Institution" were also considered to be an "employee" for the purpose of this Act provided they satisfy one of the two conditions: 1) either their monthly wages do not exceed Rs. 1500, or 2) they had at any time been in insurable employment. Since managerial and administrative staff generally receive monthly wages much higher than Rs. 1500 this condition excluded almost all of them as an "employee" under this Act. However, the second condition was somewhat ambiguous and open to interpretation.

 

This ambiguity was removed when the entire second proviso was omitted by the 1994 Amendment (see footnote 5 on page 870) extending the scope of the law to include managerial and administrative staff within the definition of an "employee" for the purposes of this Act. The effect of this amendment was that now all employees, irrespective of status, nature of job, powers enjoyed, salary drawn, will now fall within the meaning of an "employee" except the Director of a limited company or a corporation. Therefore, since 1994 each and every person employed in any industry or establishment whether in managerial and administrative capacity or holding any professional degree came within the scope of the definition of an "employee" and accordingly required to be registered as insured person.

 

'Director' do not fall under the definition of "employee":

 

After registration, the company resisted making contribution and challenged the registration as it had only eight (8) employees ‑‑ as shown by payroll record ‑‑ and three directors, who were all members of one family. EOBI contended that the three 'Directors' of the company are to be included as 'employees'. Section 2(c) described "employer" as a person who may be Managing Director if has a control over the affairs of the industry or where the affairs of the industry are entrusted to him. Held, directors did not fall within the definition of "employee" as given in S. 2(bb) of Employees' Old‑Age Benefits Act, 1976. Total number of Employees in the Company being less than required number of ten, the Act was not applicable to the Company. Order of Institution whereby Company was registered and was asked to make contribution was set aside by High Court [H.C. (Pesh.): Globe Traders vs. EOBI and others; 2000 PLC 336).

 

Sec. 2(e) "establishment" ‑ includes clubs, hostels, organisations and messes, not maintained for profit or gain and establishment, including hospitals, for the treatment of sick, infirm, destitute, or mentally unfit persons; a construction industry, as defined in the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, a factory as defined in the Factories Act, 1934; a mine as defined in the Mines Act, 1923; a road transport service as defined in the Road Transport Works Ordinance, 1961.

 

Non‑profit educational institutions are included in 'establishment':

 

Schools, even it was not being run for profit or gain, held, would fall within purview of term 'establishment' as defined in the Act and as such would require compulsory registration under the Act [H.C. (Lah.): Saint Peter High School, Gujranwala vs. Assistant Director (Field Operation) Employees' Old‑Age Benefit Institution; 1990 PLC 244].

 

"Educational institution" is covered by definition of an "establishment" within meaning of Employees Old‑Age Benefits, 1976 [H.C. (Lah.): Sacred Heart High School, Faisalabad vs. Director, Social Security, Faisalabad and 2 others; 1997 PLC 729 = PLJ 1997 Lah. 1332). [See also SC (Pak):    Don Bosco High School vs. Assistant Director, EOBI, PLD 1989 SC 128).

 

Race clubs conducting races and employing more than ten persons is an 'establishment' covered by the Act [S.C. (Pak): Lahore Race Club vs. Deputy Director, EOBI; PLJ 1998 SC 1728 = 1998 SCMR 1571).

 

Government Road Transport, being a statutory body, does not attract provisions of Old‑Age Benefits Scheme. However, the Act would be applicable to those employees of GRT who were employees of Body Building Workshop of Government Transport Service, because such workshop was not exempt from the provisions of S. 47(f) of this Act. [H.C. (Pesh.): Mohabat Khan and 77 others vs. Road Transport Board and 4 others; 1990 PLC 794].

 

Cluster of commercial establishments" as shops/sales depots spread throughout the country cannot be considered as independent units as they are owned and Controlled by the same establishment through its head office. This establishment is liable to make contribution on behalf of all its insurable employees in these shops/sales depots [S.C.(Pak): Service Sales Corporation (Pvt.) Ltd., vs. Assistant Directors, Field Operation Employees Old Age Benefits Institution and others; 2001 SCMR 1599].

 

COLA part of wages for EOAB contributions?

 

Before 1983 the definition of "wages' in Employees Old-Age Benefits Act, 1976 was taken from the Payment of Wages Act, 1936, which had not excluded cost of living allowance either expressly or by implication. After 1983 amendment in EOAB Act, the new definition of "wages" was adopted from employees Cost of Living (Relief.) Act, 1973; which expressly included cost of living allowance as part of wages, Held: Cost of Living Allowance could be included in wages of employees for purpose of contributions under the Employees Old‑Age Benefits even before the amendment of definition of "wages" [H.C.­(Kar.): Mehran Sugar Mills Ltd. Karachi vs. Employees Old‑Age Benefits Institution, Karachi, 1993 PLC 630].

 

After amendment and with the deletion of word “not” in section 7 of Employees Cost of Living (Relief.) Act, 1973, enjoins the “cost of living allowance” shall be part of wages for the purposes of any other law including the purposes of contribution to provident find gratuity bonus, social security scheme and calculating of wages for overtime work. (H.C.(Lah.): Imperial Electric Co. Ltd., through Director vs. The Board of Trustees of Employees Old-Age Benefits trough Chairman and another; 2000 PLC 313].

 

COLA included in the definition of “wages” as it is not expressly excluded for purpose of contribution to the EOAB.

 

On demand and show‑cause notice by EOBI for short payment, petitioner contended that cost of living allowance could not be included in the definition of `wages' for the purpose of Employees' Old‑Age Benefits Act, 1976. Certain laws though had been excluded from the purview of the Act to section 7 of the employees' Cost of Living (Relief.) Act, 1973 but there was no express exclusion of cost of living allowance from the purview of the provisions of the Act. Held, if tree same was not excluded either expressly or by implication from the definition; of 'wages' it could be included in the wages of employees for the purpose of contribution under the Employees' Old‑Age Benefits Act, 1976. Contribution demand by the Authorities vide demand and show‑cause notice did net suffer any illegality in circumstances [H.C.(Lah.): International Beverages Ltd., Islamabad vs. The Board of Trustees of Employees Old‑Age Benefits, Regional Office Lahore and another; 2000 PLC 702].

 

On the other hand, all Provincial COLAs statutes [see section 7] does not allow provincial cost of living allowance or by any other name ‑‑ to from part of wages, however, the definition of wages in the EOAB Act, 1976, appears m include it and EOBI could demand contributions from employees on provincial COLA allowances as well.

 

Azad Jammu and Kashmir Employees' Old-Age Benefits (Extension of Functions to Azad Jammu and Kashmir) Act, 1980 was not competently enacted by Azad Jammu and Kashmir Council and was void from its very inception; in circumstances [S.C.(AJ & K): Jabeer Hotel, Mirpur through Proprietor vs. Kashmir Council, Islamabad through Secretary and 4 others; 2000 PLC (C. S.) 11].