Permanent employees in the private sector are going to have to contribute five percent of their net salary following the ratification of the private pension fund proclamation on 9 June 2011.

The scheme will go into effect as of 8 July 2011, according to the Private Organizations Employees Social Security Agency.

The collected pension fund will be invested elsewhere in the economy where it will generate the maximum possible profit, Getachew Belay, head of the agency, said. He said that such profit would not be subjected to tax.

Employees working on contractual basis are not covered in the pension fund. And firms that had no provident fund scheme for their permanent employees before the proclamation was enacted will have to join the pension fund.

Source: Capital