Room # 3, Falaknuma Bldg.
39 Abdullah Haroon Rd.
Circular Number: C-106
FURTHER CLARIFICATIONS IN CONNECTION WITH THE AMENDMENTS IN THE E.O.B. ACT, 1976
Further to our Circular No. 105 dated 11-07-2005 in connection with the amendments made in the Employees Old-Age Benefits Act, 1976 following clarifications are made in view of queries of our some clients.
1- CHECKING OF RECORDS:
(a) Though not happily worded, as provided by the new Section 12(2) all newly registered establishments are immuned from checking of records for two years from the date of registration or from 01-07-2005 whichever is later if the employer does not reduce the number of insured employees. On expiry of two years such newly registered establishments could take further other subsequent exemptions from checking of records of two years by raising the number of insured persons at least by 10% after every two years.
(b) The establishments already registered are also exempted from checking of records of two years from 01-07-2005 to 30-06-2007 provided that the employer does not reduce the number of insured employees. For this, increasing the number of insured persons by 10% is not required.
(c) On expiry of the said two years already registered establishments could also get further subsequent exemption from checking of records of subsequent two years by raising the number of insured persons at least by 10%.
(d) In addition to (a) to (c) above, at any time later on, the records of the employer of two years shall also not be checked if the employer increases the number of insured employees at least by 10%.
(e) The limit for checking of records where the above exemptions do not apply still remains the records of only the last two years.
It would be advisable for the employer to inform the Institution in writing of increasing the said 10% for getting the exemption.
2- THE RATE OF WAGES:
As mentioned in the said Circular the actual wages including allowances of insured employees are to be ignored and instead the rate/s of minimum wages declared under the Minimum Wages for Unskilled Workers Ordinance, 1969 from time to time has to be taken as the rate of wages of all insured employees and the
Contd. ~ P/2
present rate of Rs.3,000/= p.m. has to be taken as the RATE of
wages of every insured employee and according to it contribution has to be worked out every month which he may earn during the month at the rate of his wages of Rs.3,000/= p.m.
3- CONTRIBUTIONS PAYABLE:
(a) The employer’s 6% contribution for an insured employee could be less than Rs.180/= in a month if the employee earns less than Rs.3,000/= p.m. in any month at the rate Rs.3,000/= p.m. wages as it is not fixed contribution of Rs.180/= p.m. and contribution shall be Rs.180/= p.m. if the employee earns full wages during any month at the rate of Rs.3,000/= p.m.
(b) As explained above similarly the employee’s contribution of 1% is not at the fixed rate of Rs.30/= p.m. but it could similarly be less if not earned full wages in any month and Rs.30/= in a month when employee earns his full wages at the rate of Rs.3,000/= p.m.
If an insured employee is absent or on leave without pay for the entire month no contribution of both sides would be payable for him for that month.
The Example given below is to make the matter further clear : –
An employee who is unauthoringly absent for 2 days without pay in a month of 30 days his wages for the month would be Rs.2,800/=, the employer’s contribution for him for the month would be Rs.168/= and the employee’s contribution for the month would be Rs.28/=. Another employee who earns his full wages of Rs.3,000/= in the month, the employer’s contribution for him for that month would be Rs.180/= and the employee’s contribution would be Rs.30/= for that month.
4- Account Books/Ledgers becoming irrelevant :
The officials of the Institution are more keen to check account books/ledgers instead of the prescribed records maintained by the employers under the Rules & Regulations of the Act and play with the figures of the account books. In view of the presumption of the wage rate as the minimum wage which is now at the rate of Rs.3,000/= p.m. the actual wages & allowances of the insured employees are to be ignored, and contributions as explained above are to be worked out on the basis of the wage rate of Rs.3,000/= p.m. and not on the actual wages & allowances paid as per pay sheet of the employer. The consolidated entries of the actual wages paid every month as per the actual pay sheet are entered on the ledgers, cash book and the account records which have become irrelevant in view of the presumed wage rate of the minimum wage and contributions of the insured employees worked out on the fictitious wage rate of Rs.3,000/= p.m. and such total fictitious wages of every month actually not paid would not be entered on the account books and ,therefore, the account books have become irrelevant for the purposes of the Act.
We hope that this shall be carefully studied to understand the above fully to implement the law correctly.
For M/s S. M. Yaqoob