Private Organization Employees Pension in Ethiopia

There has been a new proclamation that provides pension for private organization employees in Ethiopia. The highlights, scope of application, the contributions and other provisions relevant to the business community in Ethiopia is compiled below.

  1. Private Organization Employees Pension Proclamation No. 715/2011 (Download)

According to the proclamation,  any permanent employee, who is an Ethiopian National, of a private organization - which is an organization established to engage in commerce, industry, agriculture, construction, social service or in any other lawful activity and which has salaried employees and includes charities and associations – is covered by this proclamation and has to contribute to the Private Employees Pension Fund.

Scope of Application

1/ Without prejudice to the appropriate provisions of the Proclamation No. 270/2002 that provide pension coverage to foreign nationals of Ethiopian origin and international agreements to which the country is a party, this Proclamation shall be applicable to employees of private organizations who are Ethiopian nationals.

However, there are exceptions

- employees, who have pension scheme or provident fund before the coming into force of this Proclamation, may either decide to continue to benefit from the pension scheme or the provident fund or agree to be covered by this Proclamation;
- Employees of religious organizations and political organizations and persons engaged in the informal sector shall, upon their consent, be covered by this Proclamation.
- Notwithstanding the provision of sub-article(1) of Article 3 of the Proclamation, this Proclamation shall not be applicable to:
a. Domestic workers; and
b. Employees of governmental international organizations and foreign diplomatic missions.

Contributions (Article 10 of the Proclamation):

The contributions payable to the Private Organizations Pension Fund shall, based on the salary (gross salary earned during normal working hours) of the employee of the private organization, be:
1) by the employer, 11%;
2) by the employee, 7%.
Total: 18%

In a transitory provision (Article 57), the total contribution is raised step by step from 12% in the first year to 18% in the fourth year as the following table indicates:

Year By the Employer By the employee Total
1st 7% 5% 12%
2nd 8% 6% 14%
3rd 9% ≥3rd Year =7% 16%
4th ≥4th year=11% 18%

Payment of Pension Contributions (Article 11 )

1/ Every private organization shall deduct contributions of its employees from their salaries and pay the amount, together with its own contributions to the Pension Fund monthly.
2/ The contributions referred to in sub-article (1) of this Article shall be paid to the Pension Fund within 30 days from the last day of the month in which payment of salary has been effected.
3/ Where the private organization fails to deduct contributions of its employees from their salaries, it shall be liable for payment of same.
4/ Contributions of private organizations and employees of private organization shall be collected within the time specified under sub article (2) of this Article by the bodies to be delegated by the Agency and paid to the Pension Fund within the first working days of the following month. (Till now Ethiopian Revenue and Customs Authority Branch offices have been collecting the payment)
5/ The Agency shall have the power to supervise the proper computation of contributions to be collected in accordance with this Article.
6/ Where a private organization fails to pay contributions for a period of more than three months, the Agency or the delegated body has the power to cause the deduction of the arrear contributions and additional payments from the money deposited in its bank account.
7/ Any bank shall, when requested by the Agency or the delegated body, have the obligation to deduct, without any precondition, the amount of contributions to be collected pursuant to sub article (1) of this Article from the account of the private organization and pay to the Agency or the delegated body.
8/ A private organization which pays salary to employees covered by pension scheme shall have the obligation to notify, in writing, to the Agency the branch of the bank and the account number in which it has deposited money, and any change of address of the bank and bank account within 15 days of the occurrence of such change.
9/ In line with the directive issued by the Ministry of Finance and Economic Development to determine the rules for enabling the collection of tax by seizing and selling the property of tax payers who failed to perform their obligation to pay tax, the Agency or the delegated body shall have the power to sell, through tender, the property of the private organization for the purpose of collecting arrear contributions that could not be collected pursuant to sub-article (7) of this Article.
10/ It is prohibited to deduct from pension contributions for payment of service charges, money transfer charges or debt or for any other purpose.
11/ The Agency may delegate any of the activities in relation to the collection and enforcement of pension contributions to other bodies.
12/ The payment of contributions shall have priority over any debt.

SOCIAL SECURITY REGISTRATION AND IDENTIFICATION NUMBER

Article 4. Registration

1/ Any private organization shall, for the purpose of registration, submit to the Agency copies of its establishment law, personal data of its employee taken at the time of first employment, letter of employment issued to the employee and other particulars determined by the Agency.
2/ The time limit for submission of data in accordance with sub-article (1) of this Article shall:
a) in the case of existing private organizations and their employees, within the time to be determined by the Agency;
b) in the case of private organizations established, or employees of private organizations employed after the effective date of this Proclamation, within 60 days from the date of establishment or employment.

Article 5. Social Security Registration Identification Number

1/ Any private organization or an employee shall, upon submission of complete data for registration, be assigned with social security identification number; provided, however, that the tax identification number of the private organization or employee, if any, shall also be taken as social security identification number.
2/ Any employee of private organization, when employed by a public office or another private organization covered by social security scheme, shall notify his identification number to such office or organization.

Article 6. Notification of Changes in Entries of Registration

1/ Any private organization shall, when change of entry of its organization or employee occurs, notify such change to the Agency, with supporting evidence, within 60 days of the occurrence of such change.
2/ Every employee of private organization shall notify, with supporting evidence, to the private organization that he is working for, any change regarding his family status.
3/ Any beneficiary who is receiving benefit shall notify, with supporting evidence, to the Agency any change in the entries of social security registration within 60 days of the occurrence of such change.
4/ Any notification of change in the entry of social security registration relating to a private organization, employee or beneficiary, shall indicate the corresponding social security identification number.
5/ Where a private organization to which a social security registration identification number is assigned has been dissolved, divided or amalgamated, the following shall notify same to the Agency, with supporting document, within 60 days from the date of the decision to such effect:
a) the former Director or the liquidator, in the case of dissolution;
b) the private organization to which employees have been transferred, in the case of division or amalgamation.

Article 7. Consequences of Failure to Submit Data for Registration

1/ The concerned officer of a private organization who fails to organize, keep and timely submit data to the Agency for registration as provided under this Part shall be punishable in accordance with Article 59 of this Proclamation.
2/ Where an employee of private organization or beneficiary fails to submit timely data relating to changes in entries of registration as provided under this Part, his survivors’ entitlements to benefits shall be based on the data that have already been organized and kept by the Agency.

PERIOD OF SERVICE AND RETIREMENT AGE

Article 15. Commencement of Period of Service

1/ The period of service of employee of a private organization shall begin with the date of his employment.
2/ Notwithstanding the provision of sub-article (1) of this Article, where an employee of a private organization has pension scheme or provident fund prior to the coming into force of this Proclamation, the pension fund or the provident fund shall be transferred to the Private Organizations Pension Fund, and the service period shall be counted to the extent the pension fund or the provident fund covers the contributions to have been made in accordance with Article 10 of this Proclamation.
3/ The service that an employee of a private organization rendered to public offices shall be counted where his contribution to the Public Servants Pension Scheme is transferred to the Private Organizations Employees Pension Scheme. For the purpose of counting the service, the organ which administers the Public Servants Pension Scheme shall transfer, within one month, the personal records of the employee and the contribution to the Private Organizations Employees Pension Fund.

Article 16. Calculation of Period of Service

1/ Period of service shall be calculated in complete years, months and days.
2/ Without prejudice to the provisions of subarticles (2) and (3) of Article 15 of this Proclamation, the period of service of an employee of private organization shall include all services rendered to public offices and private organizations covered by the Private Organizations Employees Pension Scheme.
3/ For any employee of private organization the following shall be counted as period of service:
a) period of service beyond retirement age, if lawfully retained in service;
b) period of service which was interrupted without interruption of payment of salary;

Download the proclamation for more information on:

- PERIOD OF SERVICE AND RETIREMENT

- AGERETIREMENT PENSION AND GRATUITY

- INVALIDITY PENSION AND GRATUITY

- EMPLOYMENT INJURY PENSION AND GRATUITY

- SURVIVORS PENSION AND GRATUITY

- GENERAL PROVISIONS RELATING TO BENEFITS

- PENALTY, etc

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