In Pakistan, employers are legally required to provide certain benefits to their employees. These mandatory benefits aim to safeguard the health, well-being, and financial security of workers.

Paid Time Off

Employers in Pakistan are required to provide various types of paid leave:

• National and Religious Holidays: Employees are entitled to paid leave on the eleven national and religious holidays declared by the government each year.
• Annual Leave: Employees who have worked continuously for a year are entitled to 14 consecutive days of paid annual leave during the following year.
• Casual Leave: Employees are entitled to 10 days of casual leave with full pay each year.
• Sick Leave: Employees are entitled to 16 days of sick leave per year, with half pay during this period.

Social Security and Old Age Benefits

Pakistan's social security system provides financial assistance to employees upon retirement, disability, or death. Employers are required to contribute towards these benefits:

• Employees' Old-Age Benefits Institution (EOBI): Employers contribute 5% of the minimum wage per employee per month to EOBI, which provides old age pension, invalidity pension, and survivor's pension to registered employees.
• Social Security: Employers contribute 6% of the minimum wage of insurable employees towards social security benefits.

The minimum wage and contribution rates may vary depending on the province.

Workers' Compensation

The Workers' Compensation Act, 1923, protects employees in case of work-related injuries or illnesses. Under this act, employers are responsible for providing:

• Medical Care: Employers must cover the cost of medical treatment, medication, specialists, hospitalization, and maternity care for work-related injuries or illnesses.
• Compensation for Loss of Earnings: In case of temporary or permanent disability due to a work-related incident, employees are entitled to compensation for loss of earnings.
• Death Benefits: In case of an employee's death due to a work-related incident, survivor benefits may be provided to their dependents.

Many companies in Pakistan offer additional benefits to attract and retain top talent, improve employee morale, and foster a positive work environment. Here's a look at some commonly offered optional employee benefits:

Health Insurance

Offering health insurance plans for employees and their dependents is a popular optional benefit in Pakistan. This can help employees manage medical expenses and provide peace of mind.

Types of Health Insurance:

• Group Health Insurance: Employers can partner with insurance companies to provide group health insurance plans at discounted rates for employees.
• Employee Assistance Programs (EAPs): Some companies offer EAPs to provide confidential counseling and support services to employees regarding personal or work-related issues.

Financial Benefits

Beyond mandatory contributions, some employers offer additional financial benefits to their employees:

• Gratuity: This is a lump sum payment made to an employee upon retirement or termination after a certain number of years of service, though not mandated by law.
• Provident Fund: Similar to gratuity, a provident fund is a voluntary scheme where both employers and employees contribute a portion of their salary towards a retirement corpus.

Work-Life Balance Benefits

Companies are increasingly recognizing the importance of work-life balance and offering benefits that cater to this need:

• Flexible Working Hours: This allows employees to adjust their work schedules to better manage personal commitments.
• Remote Working: Employers may offer remote work options for certain positions, providing flexibility and reducing commuting time.
• Childcare Assistance: This could involve on-site daycare facilities or subsidies for childcare expenses.

Training and Development

Investing in employee development demonstrates an employer's commitment to their workforce and future success. Some common offerings include:

• Training Programs: Companies may provide in-house training programs, workshops, or tuition reimbursement for employees to develop their skills and knowledge.
• Professional Development Opportunities: This could involve sponsoring employees to attend conferences, seminars, or professional development courses.

In Pakistan, as of April 2024, health insurance is not a compulsory requirement for employees. However, the government is considering proposals for mandatory health insurance.

Current Landscape

Currently, health insurance is an optional benefit that some employers provide to attract and retain talent. Employers can collaborate with insurance companies to offer group health insurance plans at discounted rates for their employees. These plans usually cover hospitalization expenses, maternity care, and certain medical treatments.

Health insurance plans can help employees manage medical expenses and avoid financial hardship in case of illness. Offering health insurance demonstrates an employer's commitment to employee well-being and can boost morale and loyalty.

Future Considerations

The Securities and Exchange Commission of Pakistan (SECP) has proposed introducing mandatory health insurance for private sector employees. This proposal aims to provide wider health coverage and financial security to workers. The proposal suggests a compulsory occupational health insurance scheme, covering full-time workers (permanent, contract, and temporary) and their dependents. The cost-sharing structure between employers and employees is still under discussion.

In Pakistan, a variety of retirement plans are available for employees. These plans can be broadly categorized into mandatory and voluntary schemes.

Employees' Old-Age Benefits Institution (EOBI)

The Employees' Old-Age Benefits Institution (EOBI) is a mandatory scheme where both employers and employees contribute a fixed percentage of the minimum wage. The EOBI provides old age pension, invalidity pension, and survivor's pension upon meeting eligibility criteria. Contribution rates and eligibility criteria for these benefits may vary depending on the province.

Provident Fund

The Provident Fund is a voluntary scheme where both employers and employees can contribute a portion of their salary towards a retirement corpus. The accumulated amount is typically paid out as a lump sum upon retirement.

Gratuity

Gratuity is a voluntary retirement benefit offered by some employers. It is a lump sum payment given upon retirement or termination after a certain number of years of service. The calculation of gratuity may vary depending on company policy.

Voluntary Pension System (VPS)

The Voluntary Pension System (VPS) is a scheme introduced by the Securities and Exchange Commission of Pakistan (SECP). It allows individuals, whether employed or self-employed, to invest in regulated pension funds for a regular income upon retirement. Contributions to the VPS are tax-deductible, and investment returns are professionally managed.

Factors to Consider When Choosing a Retirement Plan

The ideal retirement plan depends on individual circumstances and financial goals. Here are some factors to consider:

Risk Tolerance

VPS offers the potential for higher returns but also carries investment risk. Provident funds and gratuity offer guaranteed returns but may not keep pace with inflation over the long term.

Investment Expertise

VPS requires some level of investment knowledge or choosing a reputable fund manager. Provident funds and gratuity are simpler options with employer involvement.

Tax Benefits

VPS contributions offer tax deductions, making it an attractive option for tax optimization.