Private Organization Employees Pension in Ethiopia

There is a separate proclamation that provides pension for private organization employees in Ethiopia.

Private Organization Employees Pension Proclamation No. 715/2011 (and Amendment Proclamation No. 908/2015)

Proclamation No. 715/2011, hereinafter the Proclamation, establishes the private organization employee’s pension scheme which means a system established to pay benefit and provide service to employees. The Pension Fund is administered by the Private Organization

Employees Social Security Agency

(As established by the Council of Ministers Regulation. No. 202/2011)

According to the proclamation, the retirement age of an employee of a private organization is 60 years based on the date of birth registered when he was employed for the first time.

In general, the benefits available under the proclamation are the retirement pension, invalidity pension, incapacity pension or survivors’ pension and gratuity. Other elements of the proclamation are discussed below particularly those relating to scope of application of the scheme, and contribution to the private organizations pension fund.

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Persons qualified for the pension scheme

(Article 2(1), and Article 3 of the Proclamation, as amended)

The Proclamation is applicable for private organizations employees which are salaried persons employed in a private organization for not less than forty five days for definite or indefinite period of time or piece of work including managerial employees. However, it doesn’t include employees engaged in cotton collection, sugar cane cutting and such other similar works regularly repeated in the course of the year. Please note that the term private organizations means 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;
Employees, who have a pension scheme or provident fund before coming into force of the proclamation, may either decide to continue to benefit from the pension scheme or the provident fund or agree to be covered in the current scheme.
Employees of religious organizations and political organizations and persons engaged in the informal sector can be, upon their consent, covered by the Proclamation.
The Proclamation doesn’t apply for domestic workers, and employees of governmental organizations, international organizations and foreign diplomatic missions.

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Contributions

(Article 10 of the Proclamation)

The contributions payable to the Private Organizations Pension Fund is, based on the salary (gross salary earned during normal working hours) of the employee of the private organization, 11 % by the employer and 7 % by the employee, a total of 18%.

In a transitory provision (Article 57 of the Proclamation), 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%	≥3rd Year =7%	18%

*Note: the transitory period was from 2011 to 2015. Now the total contribution is 18% (11% employer, 7% employee)

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Payment of pension contributions

(Article 11 of the Proclamation)

Under the scheme, every private organization deducts contributions of its employees from their salaries and pays the amount, together with its own contributions to the Pension Fund monthly. The contribution is paid to the Pension Fund within 30 days from the last day of the month in which payment of salary has been effected.
Failure of the private organization to deduct contributions of its employees from their salaries is liable for payment of the same. 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. 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 from the account of the private organization and pay to the Agency or the delegated body.
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.
It is prohibited to deduct from pension contributions for payment of service charges, money transfer charges or debt or for any other purpose. The payment of contributions shall have priority over any debt.

Download the proclamation for more information on: