When it comes to employee benefits in Pakistan, most HR teams and business owners think of group life insurance, medical coverage, or performance bonuses. But there’s one statutory benefit that is often overlooked in the private sector—Employees’ Old-Age Benefits Institution (EOBI).
Despite being mandatory for eligible organizations, EOBI remains underutilized, misunderstood, and, in many cases, neglected. Both employers and employees lack awareness of how it works, and inadequate contributions from the private sector leave workers without a financial safety net in retirement.
For HR and payroll professionals, this isn’t just a compliance issue—it’s a matter of long-term trust, employee security, and organizational credibility.
What is EOBI and Why Does It Matter?
EOBI is Pakistan’s state-run pension scheme designed to provide financial support to employees after retirement, in cases of disability, or to their dependents after death. Registered employers contribute 5% of an employee’s minimum wage, while employees contribute 1% of their minimum wage.
On retirement, eligible employees receive a lifelong pension—a benefit that can make a real difference in an economy where inflation and rising living costs eat into personal savings.
For businesses, compliance with EOBI is not just a legal obligation but also a way to demonstrate commitment to employee welfare. Unfortunately, many organizations treat it as a checkbox requirement, if they consider it at all.
The Reality: Low Awareness in the Private Sector
Here’s the problem—most employees don’t even know if they are registered with EOBI. Payroll teams often handle monthly deductions without educating staff about what EOBI means, how to claim it, or why it’s important.
Some common issues we see in the private sector include:
- Unregistered businesses: Many SMEs don’t register with EOBI, assuming it only applies to large corporations.
- Employee ignorance: Workers rarely receive orientation about EOBI, so they have no idea how contributions benefit them.
- Poor documentation: HR teams often fail to maintain complete employee records, making it harder to process claims later.
- Short-term mindset: Employers view EOBI contributions as an unnecessary cost rather than a long-term investment in employee loyalty.
This lack of awareness creates a disconnect between payroll deductions and actual employee benefits, leaving many workers disillusioned.
Inadequate Contributions: Cutting Corners Hurts Everyone
Even in companies where EOBI is implemented, contributions are often inadequate. Here’s why:
- Underreporting salaries: To minimize contributions, some employers register employees at the minimum wage—even if they earn much more.
- Partial registrations: Not all eligible employees are registered, especially contractual and temporary staff.
- Non-compliance: Certain businesses delay or skip contributions, risking penalties but prioritizing short-term savings.
The result? Employees retire with pensions far below what they should rightfully receive. For example, if a worker is registered at the minimum wage, their pension remains limited, regardless of their actual earnings.
From an HR perspective, this creates serious reputational risks. Employees who discover they were underreported or not registered at all may lose trust in the organization, leading to higher turnover and a damaged employer brand.
Why HR and Payroll Should Take the Lead
For business owners and HR managers, ensuring proper EOBI compliance should be a priority. Here’s why:
- Legal Compliance – Non-compliance with EOBI can attract penalties, inspections, and legal complications.
- Employee Retention – Offering clarity and transparency around retirement benefits strengthens trust.
- Employer Branding – A company that takes employee welfare seriously is more attractive to top talent.
- Payroll Accuracy – Proper integration of EOBI into payroll ensures fewer errors and disputes down the line.
The role of HR isn’t just to process forms—it’s to create awareness, maintain transparency, and build a sense of security for employees.
Common Myths About EOBI (That HR Should Dispel)
To tackle low awareness, HR professionals need to break some myths:
- “EOBI is only for government employees.”
Wrong: EOBI is for private-sector employees of registered organizations as well.
- “Small businesses are exempt.”
Not true: if your business employs five or more people, you are required to register with EOBI.
- “Employees can’t claim unless they work 20 years in one company.”
False: EOBI pensions are based on total contributions, not just tenure at one employer. Contributions carry forward across jobs if records are properly maintained.
- “It’s too complicated to manage.”
While paperwork can be tricky, modern payroll systems and proper HR documentation make EOBI management easier than ever.
How Businesses Can Improve EOBI Implementation
If you’re an HR or payroll professional, here’s a practical checklist for better EOBI compliance:
- Audit Your Records: Ensure all eligible employees are registered and that contributions match actual salaries.
- Educate Employees: Conduct awareness sessions or circulate simple guides explaining how EOBI works.
- Integrate Payroll Systems: Use payroll software to automatically calculate and process EOBI contributions.
- Maintain Documentation: Keep CNIC copies, employment records, and contribution slips updated to avoid disputes later.
- Regularly Review Compliance: Assign an HR/payroll team member to monitor ongoing EOBI compliance and respond to employee queries.
By taking these steps, organizations can move from minimal compliance to meaningful employee benefit delivery. HR teams can also take a holistic approach by designing benefits packages that balance multiple elements such as group life, provident fund, and EOBI for maximum impact. For more information, visit our blog Designing Employee Benefits in Pakistan: How to Balance Group Life, Provident Fund & EOBI
The Bigger Picture: Why EOBI Awareness Benefits Everyone
EOBI isn’t just about meeting regulations—it’s about shaping a more stable, secure workforce. In a country where retirement planning is often neglected, EOBI provides a lifeline. For more information about why this is important, visit our blog Comparing Provident Funds with Other Retirement Savings Options in Pakistan
For businesses, this translates into:
- Reduced stress among employees worried about the future.
- Higher employee engagement and loyalty.
- Stronger alignment between payroll practices and employee welfare.
When employers actively manage and communicate EOBI contributions, they not only comply with the law but also build a culture of care and trust.
Final Thoughts
Low awareness and inadequate contributions to EOBI remain a serious challenge in Pakistan’s private sector. Too often, employers underestimate its importance or cut corners in implementation. But from an HR and payroll perspective, this is a missed opportunity.
By prioritizing compliance, improving communication, and treating EOBI as more than a deduction line in payroll, businesses can foster long-term loyalty and credibility.
At the end of the day, an employee’s trust in your organization often rests on how secure they feel about their future. Making EOBI transparent, fair, and accessible is one of the simplest ways to strengthen that trust.
Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.