EOBI expansion and reform

EDITORIAL: One of the significant decisions emerging from Wednesday’s meeting of the federal cabinet was the approval of a 15 percent increase in pensions under the Employees Old Age Benefits Institution (EOBI). The increase, raising pensions from the current Rs 10,000 to Rs 11,500, will be funded internally by EOBI.

While this may seem too modest compared to the 188 percent hike in salaries for National Assembly members, it still offers some relief to retired workers at a time when inflation is soaring, and living costs continue to rise.

Equally, if not more, important is Prime Minister Shehbaz Sharif’s announcement of a cabinet committee tasked with recommending long-overdue reforms to the EOBI. This initiative could pave the way for changes that are desperately needed within the institution, ensuring that it better serves those it is meant to protect.

The committee’s mandate goes beyond internal reforms. It is tasked with exploring ways to extend pension coverage to Pakistan’s vast informal workforce that has long been neglected and excluded from any formal social security benefits. An overwhelming majority of Pakistan’s labour force — estimated at over 70 percent — is employed in the informal sector.

This includes domestic workers, farm labourers, daily wage earners, street vendors, and other workers who make substantial contribution to the nation’s economic growth and social stability. Yet, they remain vulnerable due to the absence of basic protections such as pensions and health insurance.

Bringing these informal workers into the fold of EOBI would mark a fundamental shift in government thinking and recognition of its responsibilities to the nation’s working masses. However, this will require serious institutional reforms, sustainable financing models, and innovative approaches. As it stands, EOBI faces numerous structural challenges that must be addressed before any expansion is feasible.

Those familiar with the institution’s operations point to funding shortfalls, administrative inefficiencies, weak compliance with existing regulations, and mismanagement of assets. To make any meaningful progress, the government must modernise EOBI’s operations, enhance transparency, and invest in technological infrastructure that enable efficient registration, contribution tracking, and benefit distribution.

A great challenge, however, will be incorporating informal workers into the EOBI system. Given that many of these workers lack formal employers, traditional contribution models will not apply. To overcome this, experts suggest exploring alternatives such as subsidised contributions, voluntary schemes, or even partnerships with microfinance institutions and community organisations. These solutions could provide a pathway for informal workers to join the system, even without a formal employer-employee relationship.

Once the programme is operational another need will be public awareness campaigns. Workers will have to be educated about the benefits available to them, how they can register, and where they can access these services. A clear, well-communicated strategy will be essential to ensure widespread participation and the success of this reform. If the government follows through on its plan and takes these necessary steps, this reform could represent the beginning of a more equitable, humane, and sustainable approach to social protections in this country.

Copyright Business Recorder, 2025