The enactment of legislation in relation to the private organization employee’s pension scheme has been a recent phenomena and it has been governed by the Private Organization Employees Pension Proclamation no. 715/2011.

Regarding the social security scheme given to the employee, article 3 sub-articles 2 (a) and (b) of the proclamation states that employee, who has pension scheme or provident fund before the 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 by the Proclamation. Also employees of religious organizations and political organizations and persons engaged in the informal sector may, upon their consent, be covered by this Proclamation.

Recently, however, it has become necessary by the government to amend the Private Organization Employees Pension Proclamation no. 715/2011.

The new draft legislation has not yet been approved by the parliament. Yet, it is worth mentioning some of the amendments made under the draft legislation.

Under the draft proclamation;

  • The definition given to “private organization employee” is made to include employees of private organizations hired for not less than one month.
  • Except employees of religious and political organizations, employees who had pension scheme or provident fund and previously decided to benefit from their pension scheme or provident fund will transfer the accumulated contribution to a pension fund of the Private Organizations Employees’ Pension Fund.
  • Where the private organization fails to pay the collected pension contributions within one month, it will be liable to pay the unpaid pension contribution including bank interest.
  • If the employment contract is terminated for any reason, the pension contribution of the private organization’s as well as the employee’s will not be reimbursed.
  • Where a private organization employee gets more than 25% annual average salary increment at any time on the normal salary paid a month before a year, then the 25% annual salary increment will only be added for the calculation of gratuity.
  • A contribution for social health insurance scheme pursuant to Social Health Insurance Proclamation will monthly be deducted from pension benefit.
  • An employee a private organization who has served at least 10 years, if terminates his contract of employment after the coming in to force of this proclamation, he shall receive retirement pension benefit for life upon attaining retirement age.
  • Where a private organization employee who receives retirement benefit is employed in a private organization covered by this proclamation and has not reached the retirement age, his new service shall be added to his previous eservice; provided that if the retirement benefit based on the accumulated service is less than the previous one; without prejudice to his right to receive the previous pension, he shall not receive any type of payment for the new service he provided.

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Note: This guide provides vital information on Ethiopian Investment law and practice and is not intended to substitute professional advice given with full knowledge of the specific circumstances of each case and proficiency in the law of Ethiopia such as might be provided by an Investment Attorney or Investment lawyer in Ethiopia. Such information about Investment in Ethiopia can be available from an Ethiopian Investment Lawyer, Ethiopian Tax lawyer, Ethiopian Employment Lawyer, Ethiopian Labour Relationships Lawyer, Ethiopian Immigration lawyer.