[HA_Law_Graduate]

For any private company in Islamabad, understanding which employee benefits mandatory are is a critical point of compliance. The answer is complicated because there isn't one single "labor law." Instead, a company's obligations are determined by a mix of different laws which are listed. This article breaks down the relevant laws and provides a clear, tiered guide based on the number of your employees.

The Relevant Laws for Islamabad (ICT)

Different laws apply to companies of different sizes when it comes to employee benefits. For businesses in the Islamabad Capital Territory (ICT), the compliance framework is primarily built from these four key pieces of legislation:  

1. The Employees' Old-Age Benefits Act, 1976 (EOBI): This is the federal law for employee pensions.  
   
2. The Provincial Employees' Social Security Ordinance, 1965 (ESSI): In the capital, this is administered by the ICT Employees Social Security Institution (IESSI) and covers health and cash benefits for employees.  
   
3. The West Pakistan Shops & Establishments Ordinance, 1969: This law governs the basic working conditions (like leave and termination notice) for smaller businesses.  
   
4. The Industrial and Commercial Employment (Standing Orders) Ordinance, 1968: This is the stricter law that applies to larger, more established companies. It is the law that makes Gratuity and Group Insurance mandatory.  
   

The most important concept to understand is the "two-law system" for general employment:

• Companies with 1 to 19 employees are governed by the 1969 Shops & Establishments Ordinance. This law provides basic protections but does not include a legal requirement to pay Gratuity.  
  
• When a company hires its 20th employee, it crosses a legal threshold. The 1968 Standing Orders Ordinance kicks in, and this law replaces many of the rules of the 1969 ordinance, imposing stricter obligations: most notably, mandatory Gratuity.  
  

Benefits by Company Size: A Tiered Compliance Guide

Here is a simple breakdown of what is applicable, and what is not, based on the number of people you employ.

Tier 1: The Micro-Enterprise (1-4 Employees)

At this stage, your business is governed by the 1969 Shops & Establishments Ordinance for basic terms, but the major statutory benefit schemes do not apply.

• Social Security (IESSI): Not Mandatory.
  
• EOBI (Pensions): Not Mandatory.
  
• Gratuity / Provident Fund: Not Mandatory.
  
• Group Life Insurance: Not Mandatory.
  
• What is required: You must still follow the 1969 Ordinance for basic rules like working hours, annual leave, and providing a written termination notice.  
  

Tier 2: The Small Business (5-9 Employees)

This is the first major step-up in compliance and the source of the EOBI debate.

• Social Security (IESSI): Mandatory. This is the first scheme that applies. Once you hire your 5th employee, you are generally required to register with IESSI for employee health and social security benefits.  
  
• EOBI (Pensions): Optional. For years, the rule was 5+ employees. However, a 2021 government reform (F081) exempted micro/small organizations (5-9 employees) from mandatory registration to ease the burden on small businesses. You can still register voluntarily, but it is no longer a legal obligation at this size.  
  
• Gratuity / Provident Fund: Not Mandatory. The 1969 Ordinance still applies.
  

Tier 3: The Growing Business (10-19 Employees)

This is the tier where the pension obligation becomes mandatory.

• Social Security (IESSI): Mandatory.
  
• EOBI (Pensions): Mandatory. The exemption for 5-9 employees ends. At 10 or more employees, registration with EOBI is a legal requirement. This aligns with the original 1976 Act and current official EOBI policy.  
  
• Gratuity / Provident Fund: Not Mandatory. You are still governed by the 1969 Ordinance, which does not mandate this benefit.  
  

Tier 4: The Established Company (20+ Employees)

This is the most significant jump in legal obligations, as you now fall under the 1968 Standing Orders Ordinance.  

• Social Security (IESSI): Mandatory.
  
• EOBI (Pensions): Mandatory.  
  
• Gratuity / Provident Fund: Mandatory. This is the "benefits cliff." The 1968 Ordinance legally requires you to pay a gratuity to eligible employees. The law states you are exempt from paying gratuity only if you have a Provident Fund where the employer's contribution is equal to or greater than the employee's contribution.  
  
• Group Life Insurance: Mandatory. This is also triggered by the 1968 Ordinance (Standing Order 10-B). The threshold is 20+ employees for commercial establishments (like offices or shops) and 50+ for industrial establishments.