Private Organization Employees' Pension in Ethiopia

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

Private Organization Employees' Pension Proclamation No. 1268/2022

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Private Organization Employees’ Pension Proclamation No. 1268/2022 (hereinafter the Proclamation) establishes the private organization employee’s pension scheme. It is a system established to pay benefit and provide service to employees.

Retirement Age

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, particularly those relating to scope of application of the scheme, and contribution to the private organizations pension fund of the proclamation, are discussed below.

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Persons qualified for the pension scheme

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

Private organizations, according to the Proclamation, are organizations established to engage in commerce, industry, agriculture, construction, social service or in any other lawful activity and which have salaried employees. The proclamation is also applicable on civil society organizations. Accordingly, employees in these organizations which are salaried persons and have been employed for not less than forty-five days for definite or an indefinite period of time or piece of work including managerial employees are beneficiaries of the pension scheme. However, the proclamation is not applicable on:

1. 1. Domestic workers;
  2. Employees of international organization and foreign diplomatic missions
  3. Owner, manager, or employee of a sole proprietorship given that the manager and employee is also the owner of the business.

Employees, who have a pension scheme or provident fund before coming into force of the proclamation, are regulated under the proclamation and included in the pension scheme.
Employees of religious organizations and political organizations and persons engaged in the informal sector can be, upon their consent, covered by the Proclamation.

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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%.

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Payment of pension contributions

(Article 12 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.

The Ministry of Revenues collects the pension contributions while the Private Organization Employees’ Social Security Fund Administration administers the pension fund (articles 11 and 13).

For more information, please read the following articles of the Proclamation.