Tag Archives: Ethiopian pension law

PUBLIC SERVANTS SOCIAL SECURITY AGENCY ESTABLISHMENT REGULATION No. 203/2011


brief note

The Public Servants Social Security Agency is established by the Council of Ministers to administer Public Servants’ Pension scheme. Unlike Private Organizations Employees Social Security Agency it is not a newly formed agency. Previously it was known as Social Security Agency and according to article 13 of this regulation, the rights and obligations of the Social Security Agency are now transferred to this agency.  Such transfer in effect repeals the establishment proclamation of the social security agency. This raises a very interesting issue regarding the mode of repeal in Ethiopia.

The social security agency was initially established under this name by Social Security Authority Establishment Proclamation No. 38-1996.  Again it was re-established by Social Security Agency Re-establishment Proclamation No.495/2006.  This proclamation expressly repeals   Proclamation No. 38-1996.   Now Proclamation No.495/2006 itself is repealed and this time not by a proclamation or by the legislature (i.e. House of People’s Representatives.

When the current regulation  (No. 203/2011)   establishes   the Public Servants Social Security Agency and at the same time transfers the rights and duties of the former Social Security Agency, this means in effect, the establishing  proclamation of the social Security Agency  (which is a primary legislation) is repealed by a regulation, which is a secondary legislation.  So now, the issue is whether a law made by the elected legislative organ  could be repealed by the council of Ministers i.e. an executive organ?    Clearly not.

The newly re-established Public Servants Social Security Agency is a single agency with the responsibility of  administering pension scheme of all federal and regional public servants including pension of the defense forces and the police. It is clear that an agency sitting in the capital city and having only a head office in Addis Ababa, will not be able to carry out its tasks without having branch offices in the regional states. Article 3 of the regulation makes the establishment of a branch a discretion. This fails to take in to consideration the complexities  of administrative activities and the scope of Public Servants’ Pension Proclamation No. 714/2011.

Additionally, collecting pension contribution, making pension payments and quickly responding to the complaints and requests of beneficiaries and the respective government organs requires establishing branch offices legally empowered to make an administrative decision within their scope. Therefore establishing a branch office is a mandatory condition for an efficient and effective system of pension administration.  In practice the previous social security agency has branch offices in most of the regions. But, the issue is more than the actual existence of the branches.

As a minimum requirement the establishing regulation should establish one branch office in each of the regional states and most importantly should specify its powers and duties and should clearly identify matters falling within the branch office. In the absence of clear mandate a physical existence by itself will not help to solve the problem of pension administration

Here is the text of the regulation. You can also download the pdf version.

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PUBLIC SERVANTS SOCIAL SECURITY AGENCY ESTABLISHMENT REGULATION No. 203/2011

COUNCIL OF MINISTERS REGULATION No. 203/2011

COUNCIL OF MINISTERS REGULATION TO PROVIDE FOR THE ESTABLISHMENT OF THE PUBLIC SERVANTS SOCIAL SECURITY AGENCY

This Regulation is issued by the Council of Ministers in accordance with Article 5 and 34 of the Definition  of Powers and Duties of the Executive Organs of the Federal Democratic Republic of Ethiopia Proclamation No. 691/2010

1. Short Title
This Regulation may be cited as the “Public Servants Social Security Agency Establishment Council of Ministers Regulation No. 203/2011.

2. Establishment

1/The Public Servants Social Security Agency (hereinafter “the Agency”) is hereby established as an autonomous federal government agency having its own juridical personality.

2/The Agency shall be accountable to the Ministry of Labour and Social Affairs .

3. Head Office

The Agency shall have its Head Office in Addis Ababa Head Office and may have branch offices elsewhere as necessary.

4. Objective

The objective of the Agency shall be to strengthen and expand public servants social security programs.

5. Powers find Duties

The Agency shall have the powers and duties:

1/ implement public servants social security laws, regulations and directives;

2/  establish efficient and effective system to implement the public servants pension scheme;
3/ establish a system for the collection of public servants pension contributions, ensure that pension contributions are collected by the appropriate organs in time and in. the correct amount, supervise the implementation of the system by employers and, where necessary, audit their documents and records by requiring their submission or through site visits;

4/ administer public servants pension funds and assets related thereto;

5/collect in advance and maintain records of evidentiary -data that entitle public servants to pension benefits;

6/take legal actions against public offices and individuals who fail to pay pension contributions, maintain accounts of contributions and furnish required documents and information on time;

7/determine the adequacy and validity of evidentiary data submitted in connection with claims [0 public servants pension entitlements, as well as the types and amounts of benefits , aJ.1d effect payments of benefits;

8/ decide on claims related to pension rights and benefits of public servants;

9/ invest public servants pension funds in treasury bonds and other secured investments specified by directives issued ‘by the Ministry of Finance and Economic’ Development;

10/cause periodical actuarial study and review of public servants pension funds;

11/ Undertake studies to strengthen public servants pension programs, submit the studies to the government and implement same upon approval;

12/ issue directives on maters that come within its powers and duties;

13/ own property, enter into contracts, sue and be sued in its own name;

14/ carry out such other activities as may be necessary for the fulfillment of its objective,

6. Organization or the Agency

The Agency shall have:

1/ a Board of management  (hereinafter the “Board”)

2/ Director General and, as may be necessary, Deputy Director Generals to be appointed by the government; and

3/ the necessary staff.

7. Members of the Board
1/ Members of the Board, including the chairperson, shall be appointed by the government, and their number shall be determined as may be necessary.

2/ The Director General of the Agency shall be member and secretary of the Board.

8. Powers and Duties of the Board

1/ The board shall oversee and supervise operations of the Agency.

2/ Without limiting the generality of sub article ( I) of this Article, the Board shall have the powers and duties to:

a) approve the strategy, plan, budget and performance report of the Agency;

b) submit to the government, for approval, general policy matters regarding the public servants pension scheme and the funds;

c) approve directives of the Agency to be issued pursuant to sub-article (12) of Article 5 of this Regulation.

9. Meetings of the Board

1/ The Board shall meet once in every three months; provided, however, that it may meet at any time as may be required.

2/ There shall be a quorum where more than half of the members .are present at a meeting of the Board.

3/ Decisions of the Board shall be passed by majority votes of the members present at a meeting; provided, however, that the Chairperson shall have a casting vote in case of a tie;

4. Without prejudice to the provisions of this Article, the Board may adopt its own rules of procedure.

10. Powers and Duties of the Director General
1/ The Director General shall be the chief executive officer of the Agency and shall, subject to the general directives of the Board, direct and administer the activities of the Agency.

2/ Without limiting the generality stated in sub· article {l) of this Article, the Director General shall:
a) exercise the powers and duties of the

Agency specified in Article 5 of this Regulation;

b) employ and administer employees of the . Agency in accordance with the federal civil

service laws;

c) prepare and submit to ,the Board the strategy, plan and budget of the Agency and implement same upon approval;

d) effect expenditure in accordance with the approved budget of the Agency;

e) represent the Agency in all its dealings with third parties;

f)submit performance and financial reports of the Agency to the Board and, upon approval, to the concerned government bodies.

3/ The Director General may delegate part of his powers and duties to the officers and other employees of the Agency to the extent necessary for the efficient performance of the activities of the Agency

11. Budget

The Agency’s budget shall be allocated from the

pension funds,

12. Books of Accounts

1/ The Agency shall keep complete and accurate books of accounts,

2/ The books of accounts and financial documents of the Agency shall be audited annually by the Auditor General or by auditors appointed by him.

13. Transfer of Rights and Obligations
The rights and obligations of the Social Security Agency re-established under Proclamation No. 495/2006 are hereby transferred to the Agency.

14. Effective Date
This Regulation shall come into force on the date of publication in the Federal Negarit Gazeta.

Done at Addis Ababa, this 25″ day of March, 2011.

MELES ZEN A WI
PRI ME MINISTER OF TH E FEDERAL DEMOC RATIC

REPUBLIC OF ETHIOPIA

Private Organizations Employees Social Security Agency Establishment Council of Ministers Regulation Number 202/2011


 Private Organizations Employees Social Security Agency Establishment Council of Ministers Regulation Number 202/2011

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Brief note

Following the promulgation of  the Private Organization Employees Pension Proclamation No. 715/2011 which which was published and became effective on, 24th June, 2011, the council of Ministers issued a regulation establishing   the Private Organizations’  Employees Social Security Agency on the 25th day of March 2011. The Agency is now in charge of the overall implementation of the Pension Proclamation No. 715/2011 particularly the administration  private organizations’ employees  pension funds.

There are two issues related to the issuance of this regulation worth considering. The first one is a minor   error in legislative drafting. If you look at the English version of the heading of pdf version (which is scanned from the hard copy) of the document you will read a title “Private Organizations’  Employees Social Security Agency Establishment Proclamation.” As a proclamation refers to statutes issued by the House of People’s Representatives, it is surely confusing when the term is used for delegated legislation made by the Council of Ministers. However,  when you compare the Amharic version of the same regulation (which is to be given effect in case of discrepancy) it becomes easy to realize that it is definitely a mistake to be blamed on the drafter. The Amharic version uses the term “ደንብ” which is use to represent the term “regulation. ”  The official title of the text, as indicated in Article 1 is also indicated as “This Regulation may be cited as the “Private Organizations’  Employees Social Security Agency Establishment Council of Ministers Regulation No. 202/2011.”  Hence the use of the term “proclamation” instead of “regulation” is an error in legislative drafting.

The second one is a fundamental constitutional issue likely to have  serious implications on the basic principles of representatives democracy and accountability of government. As it is true in all democracies, the executive organ of government does not have a power of making primary legislation. However, irrespective of the principle of separation of powers, the complexities of public  administration have necessitated the delegation of legislative powers to the executives organ. In Ethiopia, the council of Ministers and administrative agencies issue regulations and directives respectively based on a delegation conferred on them by the House of People’s Representatives. This being the case, delegation legislation as it offends the constitutional principle of separation of powers, is to be exercised narrowly. Constitutional fundamental public policy issues, therefore could never be delegated to executive organs.

When you see the above regulation, it essentially creates a government organ in charge of  implementing a law made by parliament. In effect, a law made by parliament is left to the fate of a decision of the executive organ. Imagine a case whereby the council of ministers refuses to establish an agency, when a law by parliament endlessly waits for implementation.  However, the basic issues involved goes beyond this.

The council of ministers by establishing an agency bestows a power upon itself.  What powers to be give to an agency is solely a matter to be decided by the legislature. This is also at odds with the principle of accountability.  How is it possible for parliament to hold a certain agency accountable when it is clear that parliament is not the source of power to that agency. Only the legislature has the power to create or ‘uncreate’ an administrative agency.  But, when the agency is directly established by the executive only the executive will have a final say on the fate of the agency.

This is not the first time the Council of Ministers establishes an administrative agency. The power to create and ‘uncreate an administrative agency was given to the council of ministers by Article 34 of proclamation number 691/2010 (Definition of Powers and Duties of the Executive Organs of the Federal Democratic Republic of Ethiopia Proclamation No. 691/2010)  which reads

“The Council of Ministers is hereby empowered, where it finds it necessary, to reorganize the federal government executive organs by issuing regulations for the closure, merger or division of an existing executive organ or for change of its accountability or mandates or for the establishment of a new one.”

The Private Organizations Employees Social Security Agency, just like other Council of Minister Agencies is established based on article 34 of this proclamation.

I will try to post more on this issue in the future. Here follows the text of the regulation.

Private Organizations Employees Social Security Agency Establishment Council of Ministers Regulation Number 202/2011 

This Regulation is issued by the Council of Ministers pursuant to article 5 and 34 of the Definition and Duties es of the Executive , Organs of the Federal Democratic  Republic of Ethiopia Proclamation No. 691/20120.

1. Short Title

This Regulation may be cited as the “Private Organizations’  Employees Social Security Agency Establishment Council of Ministers Regulation No. 202/2011

2. Establishment

1/ The Private Organizations Employees Social Security Agency ‘(hereinafter “the Agency”) is hereby established the as an autonomous federal agency having its own juridical personality

2/  The Agency shall be accountable to the Ministry of Labour and Social Affairs.

3. Head Office

The Agency shall have its own Head Office in Addis Ababa and may have branch offices elsewhere as necessary.

4. Objective

The objective of the Agency shall be to strengthen and expand private organizations’ employees social security programs.

5. Powers and Duties

The Agency shall have the powers and duties to:

1/  implement private Organizations’ empioyees social security laws, regulations and directives:

2/ establish efficient and effective system to implement the private organizations’ employees pension scheme;

3/ establish a system for the collection of private organizations’ employees pension contributions, collect contributions, ensure that pension contributions are collected by the appropriate organ in time and in the correct amount, supervise the implementation of the system by employers and, where necessary audit their documents and records by requiring their  submission or through site visits;

4/ administer private organizations’ employees  pension funds and assets related thereto;

5/collect in advance and maintain records of evidentiary data that entitle private organizations employees to pension benefits;

6/ take legal actions against employers and other individuals who fail to  pay pension contributions, maintain accounts of contributions and furnish required documents and information on time;

7/         determine, the adequacy and validity of evidentiary data submitted in connection with claims of the employees of private organizations pension entitlements, as well as the types and amounts of benefits, and effect, payments of benefits;

8/ decide on claims related to pension rights and benefits of employees of private organizations;

9/ invest the private organizations’ employees pension fund in treasury bonds and ocher secured investments specified by directives issued by the Ministry or Finance and Economic Development;

10/ cause periodical actuarial study and review of the private organizations’ employees pension funds;

11/ undertake studies to strengthen pension programs of employees of private organizations, submit the studies to the government and implement same upon approval;

12/ issue directives on matters that come within its powers and duties;

13/ own property, enter in to contracts, sue and be sued in its own name;

14/ carry out such other activities as may be necessary for the fulfillment of its objective.

6. Organization of the Agency

The Agency shall have:

1/ a Board of Management (hereinafter the “Board”),

2/ Director General and, as may be necessary Deputy Director Generals to be appointed by the government, and

3/  the necessary staff.

7. Members of the Board

1/ Members of the Board shall be equally represented from the government, private organizations and the employees of the private organizations; and their number shall be determined as may be necessary.

2/  The Chairperson and government representatives shall be assigned by the government. The election procedure ,applicable’ to representatives of private organizations and employees shall be determined by government.

3/  The· Director General of the Agency shall be member and secretary of the Board.

8. Powers and Duties of the Board

1/  The board shall oversee and supervise operation of the Agency

2/  Without limiting the generality of sub-article (1) of this Article, the Board shall have the powers and duties to:

a)  approve the strategy, plans, budgets and performance reports of the Agency:

b) submit to government, for approval, general policy matters regarding the Private organizations’ employees pension scheme and fund;

c)  approve directives of the Agency to be issued pursuant to sub-article (2) of Article 5 of this Regulation.

9. Meetings of the Beard

1/ The Board shall meet once in every three months: provided, however, that it may meet at any time as may be required.

2/ There shall be a quorum where more than half of the members are present at a meeting of the Board.

3/ Decisions of the Board shall be passed by majority Vales of the members present at a meeting; provided, however, that the Chairperson shall have a Casting vote in case of a tie.

4/ Without prejudice to the provisions of this Article, the Board may adopt its own rules of procedure

10.  Powers and Duties of the Director General

1/  The Director General shall be the chief executive officer of the Agency and shall, subject to the general directives of the Board, direct and administer activities of the Agency,

2/  Without limiting the generality of sub-article (1) of this Article, the Director General shall:

a)  exercise the powers and duties of the. Agency. specified in Adele 5 of this Regulation.;

b)  employ and administer employees of the Agency in accordance with the federal civil service laws;

c)  prepare and submit to the Board the strategy, plan and budgets of the Agency and implement same upon approval;

d)  effect expenditure in accordance with the approved budget of the Agency;

e)  represent the Agency in all its dealings with third parties;

f)  submit performance and financial reports of the Agency to the Board and, upon approval, to the concerned government bodies,

3/  The Director General may delegate part of his powers and duties to the officer and other employees of the Agency to the extent necessary for  the efficient performance of the activities of the Agency

11. Budget

The Budget of the Agency shall be allocated from the pension fund; provided however, that the government shall allocate initial budget to commence operation.

12. Books of Account

1/ The Agency shall keep complete and accurate books of a Accounts.

2/ The books of accounts and financial documents of the Agency shall be audited annually by the Auditor Genera! or by auditors appointed by him,

13. Effective Date

This Regulation shall come into force ill’ on the date of publication in the Federal Negarit Gazeta.

Done at Addis Ababa, this 25th day of March 2011,

MELES  ZENAWI

PRIME MINISTER  OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

University lecturers in Ethiopia do not have a legal right to pension


University lecturers in Ethiopia do not have a legal right to pension

It may be surprise news for most university lecturers in Ethiopia
to hear that they are not covered by the recent public pension law. The Public Servants’
Pension Proclamation No. 714/2011 generally provides pension coverage to
“public servants.” who are of Ethiopian nationals. University
lecturers, mainly those in the public universities qualify the definition of
public servants, hence should have been entitled to pension. The problem is not
all public servants have a legal right to pension according to the Public Servants’
Pension Proclamation.

Public servant is defined in article 2 sub 1 as
“a person permanently employed in any public office, and includes
government appointees, members of parliament, members of the defense force and
the police.”

Does this definition consider an academic staff of a public
University as a public servant? Thanks to the wider definition of public office
in article 2 sub 5 we may safely conclude that an academic staff is a public
servant. Article 2 sub 5 defines a public office as “any government
office, institution or organ wholly or partly run by government budget, and
includes public institutions and enterprises run by their own income”

However, Even though university lecturers are public servants,
they are not still legally qualified to pension coverage. A public servant for
the purpose of pension coverage includes only those who are “permanently employed
(article 2 sub1 of proclamation no 714/2011)

By way of conclusion, since university lecturers are not permanent
employees of the institution, they can not legally claim pension coverage based
on proclamation no 714/2011.

The fact that tenure employment is a privilege not a right has
been made clear by the higher education proclamation no 650/2009. According to
article 33 sub 1, tenured employment of academic staff constitutes a privilege
to be attained through meritorious continuous service and outstanding scholarly
teaching and/or research or institutional leadership achievements as an
incentive to encourage academics to continue to excel in their professions.

A tenured academic staff in addition to his entitlement to
pension, shall have job security, and may not be dismissed from his position
unless he has committed a serious breach of discipline as stipulated by the
senate statutes of the public institution.

The most surprising (may be confusing) fact is not the absence of
legally recognized right to pension for academic staffs of public university.

In practice, pension contribution is collected from all university
lecturers. To make it clear, even though they are not legally entitled to
pension, practically pension contribution is deducted from their salary every
month.

Amount of pension contribution in the new Ethiopian pension laws


One of the significant changes introduced by the new Ethiopian pension laws is the substantial increase in the amount of pension contribution by the beneficiary and the government/employer. Until June 2011, only the public sector was covered by the pension scheme. Starting from July 2011 those (employees and employers) in the private sector will start making a contribution following the first private organization employees pension law. So what is the amount to be contributed by employees, employers and the public organs (the government)? The following table summarizes the contributions to be made from each respective party according to the proclamation no.714 and 715.

In the previous (now repealed pension law) the amount of pension contribution by public servants including military and police officers was 4% of their gross salary. However, there was a significant variation in the contribution to be made by the government for public servants as compared to the contribution to military and police officers.

According to article 5 and 6 of the repealed Public Servants’ Pensions Proclamation No. 345/2003 the contribution of the government to public servants pension was 6% whereas it was 16% for military and police pension.

The same variation is also reflected in the new public servants proclamation no 714/2011. The 16% government contribution has now risen to 25%, almost 1/4th of the gross salary of military and police officers. On the contrary the government contributes only 7% for public servants.

Just refer to the following table for the specific percentage of contribution by each of the parties with the responsibility of pension contribution under the new pension laws.

Note:

  • NA= Not Applicable
  • In order to calculate 1st 2nd 3rd and 4th year the time to start is July 1 2011
  • The percentage is calculated based on the gross salary of the employee i.e. before deduction of tax and other encumbrances. Salary does not include hardship allowance, transport allowance, house allowance or other related benefits attached with certain position.

Download    pension contribution table

Private Organization Employees Pension Proclamation No. 715/2011


Related posts

A PROCLAMATION TO PROVIDE FOR PUBLIC SERVANTS’ PENSION PROCLAMATION No. 714/2011

PUBLIC SERVANTS SOCIAL SECURITY AGENCY ESTABLISHMENT REGULATION No. 203/2011

Types of pension benefits according to the new Private Organization Employees Pension Proclamation No. 715/2011

Resignation and the paradox of Ethiopian pension law

Ethiopian Pension Laws

Amount of pension contribution in the new Ethiopian pension laws

University lecturers in Ethiopia do not have a legal right to pension.

 

PROCLAMATION NO. 715/2011

A PROCLAMATION TO PROVIDE PENSION OF PRIVATE ORGANIZATION EMPLOYEES

Download Private Organization Employees Pension Proclamation No. 715/2011

WHEREAS it is part of the country’s social policy to expand the social security system and reach citizens step by step;

WHEREAS the strengthening and sustainability of the system greatly contributes to social justice, industrial peace, poverty reduction and development;

WHEREAS it has been found necessary to put in

place private organization employees pension scheme;

NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows:

PART ONE GENERAL

This Proclamation may be cited as the “Private Organization Employees Pension Proclamation No. 715/2011”.

2. Definitions

In this Proclamation, unless the context otherwise requires:

1/“private organization employee” means a salaried person permanently employed in any private organization;

2/“permanent employee” means an employee hired for an indefinite period in accordance with the definition assigned to it under the Labour Proclamation No. 377/2003;

3/ “private organization” 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;

4/“government” means the federal government and includes the regional states of the Federal Democratic Republic of Ethiopia;

5/“region” means any state referred to in

Article 47(1) of the Constitution of the Federal Democratic Republic of Ethiopia and includes the Addis Ababa and Dire Dawa city administrations;

6/“private service” means service rendered by employees of private organizations;

7/“benefit” means retirement pension, invalidity pension, incapacity pension or survivors’ pension and includes gratuity and the refundable pension contribution;

8/“salary” means monthly salary received by the employees of private organization, for services rendered during regular working hours without the deduction of any amounts in respect of income tax or any other matter;

9/“beneficiary” means an employee of private organization or his survivor who receives benefits or fulfils the conditions for receiving benefits in accordance with this proclamation.

10/“survivor” includes persons mentioned under

Article 39(3) of this Proclamation;

11/“private organization employees pension scheme” means a system established to pay benefit and provide service to employees covered by this Proclamation;

12/ “pension fund” means fund established for the purpose of collecting pension contributions and effecting benefit payments pursuant to this Proclamation;

13/“Agency” means the Private Organization

Employees Social Security Agency established by the Council of Ministers Regulation No. 202/2011;

14/“person” means any natural or juridical person;

15/any expression in the masculine gender includes the feminine.

3. Scope of application

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.

2/ Notwithstanding the provision of sub-article

(1) of this Article:

a)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;

b)employees of religious organizations and political organizations and persons engaged in the informal sector shall, upon their consent, be covered by this Proclamation.

3/ Notwithstanding the provision of sub-article

(1) of this Article, this Proclamation shall not be applicable to:

a)domestic workers; and

b)employees of governmental international organizations and foreign diplomatic missions.

Download Private Organization Employees Pension Proclamation No. 715/2011

Download Private Organization Employees Pension Proclamation No. 715/2011     

A PROCLAMATION TO PROVIDE FOR PUBLIC SERVANTS’ PENSION PROCLAMATION No. 714/2011


Thanks to MIchael Worku G/silasie Assistant Judge at Federal High Court, Dire Dawa for providing the soft copy (pdf format) of this law.

A PROCLAMATION TO PROVIDE FOR PUBLIC SERVANTS’ PENSION PROCLAMATION No. 714/2011

Download A PROCLAMATION TO PROVIDE FOR PUBLIC SERVANTS’ PENSION PROCLAMATION No. 714/2011

TITLE AND PREAMBLE

PART ONE GENERAL

PART TWO SOCIAL SECURITY REGISTRATION AND IDENTIFICATION NUMBER

PART THREE PENSION SCHEME, FUNDS AND CONTRIBUTIONS

PART FOUR PERIOD OF SERVICE AND RETIREMENT AGE

PART FIVE RETIREMENT PENSION AND GRATUITY

PART SIX INVALIDITY PENSION AND GRATUITY

PART SEVEN EMPLOYMENT INJURY PENSION AND GRATUITY

PART EIGHT SURVIVORS PENSION AND GRATUITY

PART NINE GENERAL PROVISIONS RELATING TO BENEFITS

PART TEN MISCELLANEOUS PROVISIONS

Pages: 1 2 3 4 5 6 7 8 9 10 11 12

Ethiopian Pension Laws


Related posts

A PROCLAMATION TO PROVIDE FOR PUBLIC SERVANTS’ PENSION PROCLAMATION No. 714/2011

PUBLIC SERVANTS SOCIAL SECURITY AGENCY ESTABLISHMENT REGULATION No. 203/2011

Types of pension benefits according to the new Private Organization Employees Pension Proclamation No. 715/2011

Resignation and the paradox of Ethiopian pension law

Amount of pension contribution in the new Ethiopian pension laws

University lecturers in Ethiopia do not have a legal right to pension.

Ethiopian Pension Laws

Employees of Private Organizations Pension Proclamation No. 715/2010

Public Servants pension Proclamation No. 714/2010

Public Servants’ Pensions (As Amended) Proclamation 633

Proclamation No. 690 Social Health Insurance

Proc No. 424-2004 Public Servants’ Pension (Amendment)

Proc No. 345-2003 Public Servants Pensions

Proc No. 313-2003 Federal police commission

Proc No. 327-2003 Establishment of the National Reserve Force

Proc No. 190-1999 Public Servants_ Pension (Amendment)

Proc No. 123-1998 Defence Forces (Amendment)

Proc No. 38-1996 Social Security Authority Establishment

Proc No. 27-1996 Defence Forces

Proclamation No. 209-1963 Public servants pension

Decree No 46-1961 Public servants pension

Resignation and the paradox of Ethiopian pension law


One of the controversies surrounding the new private organization employee’s pension proclamation has been the effect of resignation on entitlement to pension benefits. Based on the length of service of the employee, resignation could have three different effects.

1. When the length of service of the employee is greater than or equal to 10 years but less than 20 years of service, resignation results in reimbursement of the employee’s contribution excluding contribution made by his employer.

2. If the employee resigns after serving for less than 10 years, he will relinquish his right to reimbursement. He will just leave empty-handed.

3. If the length of service is greater than or equal to 20 years but less than 25 years the employee will be entitled to get full retirement pension but payment will be made upon attainment of retirement age.

4. If the length of service of the employee is greater than or equal to 25 years ,  resignation results in entitlement to full retirement pension which will start to be paid beginning five years prior to retirement age.

As indicated above, an employee who resigns after serving for less than 10 years is not entitled to claim his own contribution. Although this has become a point of controversy in light of the new private organizations pension proclamation, a similar limitation has existed for more than 40 years in case of government employees’ pension laws.

In this regard one of the oldest pension laws of the country ( Public servant’s pension decree No. 46/1961) reads:

“A public servant who voluntarily resigns prior to completing 10 years of service shall be entitled to no benefits hereunder” (Article 8(a) of Public servant’s pension decree No. 46/1961)

All subsequent pension legislations have adopted a similar position regarding the effect of resignation before 10 years of service. During this time no strong criticism has been heard against such statutes.

What follows is a brief analysis or criticism of the new law and previous statutes as regards their prohibition of reimbursement of employee’s contribution. I will also try to forward some advice to employees who want to quit their job but still get their own contribution by way of reimbursement even if they have served for less than 10 years.

The meaning of resignation

In order to deny an employee of his own contribution by way of reimbursement, two cumulative conditions have to be established.  First, it has to be proved that the length of service year of the employee is less than 10 years. Additionally, the ground of termination of the employment contract should be one which could properly be categorized as resignation. Establishing the second condition requires legally defining ‘resignation’ and examining the specific circumstances to determine whether they fall under the elements of the definition. Both of the newly enacted pension laws i.e. Government employees’ pension proclamation No. 714/2011 and the private organization employees pension proclamation No. 715/2011 do not define the term resignation. Similarly although, resignation by the employee is one of the grounds of termination of employment contract in the labour proclamation No. 377/06, no where is the term defined.

Generally speaking, resignation refers to the acts or instances by which an employee willfully or upon his own consent quits his job. The presence of consent is very important to ascertain the existence of resignation. However, the presence of consent could not be taken as a sole test of resignation. In certain cases, a willful act by the employee may not be regarded as resignation. On the other hand, the act of quitting a job by the employee may not be taken as indicative of the presence of consent. It is possible that he may resign but without his consent.

To make things clear let me just raise two questions which are crucial for the clear understanding of the term resignation.

  • If an employee makes an express written agreement with his employer for the termination of the employment contract, could this be taken as resignation for the purpose of the pension laws?
  • If an employee leaves or quits her job due to undue influence or harassment by her employer, is that resignation for the purpose of the pension laws?

The above two questions make it clear that in order to deny an reimbursement to an employee whose length of service is less than 10 years,  it is of primary importance to come up with a valid and clear definition of the term resignation.

In order to provide a logical answer to the above question and come up with a working definition of resignation in light of the Ethiopian pension laws, it will be helpful to refer to some of the relevant provisions of the labour proclamation.

As regards the first question, article 25 of the labour proclamation provides that the employee and the employer could reach at an agreement to put an end to their employment contract. For such an agreement to be considered as valid it has to be concluded in writing. Article 25 is found under section one of chapter two of the labour proclamation. Chapter two is a general provision which lists down all the grounds of termination of employment contract. According to 23 of the proclamation, a contract of employment shall only be terminated;

  • Upon initiation by the employer or worker
  • In accordance with the provisions of the law or a collective agreement or
  • By the agreement of the two parties

Resignation as a ground of termination is categorized under ‘termination of employment contract by the initiation of the worker’

Therefore, this will lead us to the conclusion that a mutual agreement to terminate an employment contract, even though, is clearly a willful act of the employee to quit his job, is not a case of resignation. This means in effect a an employee who has a service year of less than 10 years could avoid the harsh effects of unilateral resignation, by making an arrangement with his employer for a mutual, bilateral agreement.

So my first advice for government employees and private organization employees covered by the pension laws is this:

  • If you decide to quit your job and your service year is less than 10 years try to convince your employer to conclude a written agreement for the termination of the employment contract.

Sometimes, the employment contract may be terminated upon the initiation of the employee (his own unilateral act), but with a defective consent. This happens when an employee quits his or her job due to intolerable undue pressure of the employer. So the question raised above is: “when an employee quits his job because the employer through his conduct has engendered his health and dignity, is it resignation?”  Resignation due to undue influence of the employer is what is known as constructive dismissal in labour law. It is a usually taken as one instance of dismissal by an employer.

The labour proclamation recognizes ‘constructive dismissal’, even though it does not specifically employ such term. The ordinary case of resignation is dealt in article 31.  Accordingly, an employee could at any time resign from his job without any valid ground. He has to simply give a one month notice to his employer.

The employee may terminate his employment contract without notice, provided that one of the grounds in article 32 is fulfilled.   Practically speaking article 32 is a typical case of constructive dismissal. Grounds under this article include:

  • Employer’s act contrary to employee’s human dignity and morals or other acts punishable under the Penal Code
  • Employer’s failure to act in case of imminent danger threatening the worker’s safety or health
  • Repetitive  failure by the employer  to fulfill his basic obligations towards the worker

An employee who quits his job due to one of the above grounds is entitled;

A.   A compensation equal to thirty times his daily wages of the last week of service

B.   Severance pay even though his length of service is below the minimum threshold of five years

This, beyond doubt, indicates that constructive dismissal is recognized under Ethiopian labour law and is not synonymous with resignation. Therefore, resignation as indicated in the pension laws should not be interpreted as if it includes acts or instances of constructive dismissal.

The paradox

Ethiopian law prohibits employee’s own contribution if he resigns and has a service year of less than 10 years. However, an employee having a service year of less than 10 years is still entitled to his contribution if;

  • He terminates his employment contract by a written agreement with his employer
  • If he quits his job due to undue pressure of his employer

There is also another 3rd mechanism. And this makes Ethiopian pension law hard to understand.

Both pension laws provide that an employee who has served for less than 20 years and whose employment contract is terminated for reasons or grounds not mentioned in the respective pension proclamations is entitled to reimbursement of his own contribution.

There are three main grounds of termination of employment mentioned by the pension proclamation. These are attaining retirement age, incapacity due illness or sickness (the specific term used by the proclamation is “health problems”) and incapacity due to employment injury. Resignation is also mentioned as one ground of termination with its own special effect as regards entitlement to reimbursement of the employee’s contribution or pension payment depending on the length of service. Therefore, any ground other than these will validly entitle an employee to his own contribution, if his length of service is less than 20 years.

Grounds not mentioned in the pension proclamations may be dismissal for misconduct, dismissal on operational grounds (reduction of workers), termination due to closure or bankruptcy of the undertaking etc…

Take the case of dismissal.

According to Ethiopian pension law, if you are dismissed for misconduct and your length of service is less than 10 years you will be entitled to reimbursement of your own pension contribution. But, if you simply resign after serving your employer for less than 10 years, you don’t get a penny.

What then would any reasonable employee do to get reimbursement if his/her length of service is less than 10 years?

Resign? Or get dismissed?

If you are absent for five consecutive days, you will be dismissed. If you commit any of the offences listed under article 27 of the labour proclamation, the effect is clearly your dismissal. It is bad that you are dismissed. But it is good if your length of service is less than 10 years, because you can now get reimbursement.   On the contrary, if you simply leave your job peacefully, and have less than 10 years length of service you don’t get any reimbursement.

Types of pension benefits according to the new Private Organization Employees Pension Proclamation No. 715/2011


The Ethiopian government has issued a new law which extends pension benefits to permanent employees of private organizations. The bill was signed by the head of state i.e. President of the Federal Democratic Republic of Ethiopia, President Girma Woldegiorgis on June 24, 2011. However, the effective date of the bill starts on the date of its publication in the Negarit Gazeta, as it is the case with other statutes issued by Parliament. Even though the exact date of the publication of the law has not been officially declared, it is almost a week since the publication of the proclamation by Bernanena Selam Printing Press, the official printing press for the law maker for the last 60 years.

When one looks into the transitory provisions, specifically those provisions providing for time limit in which contribution by the employee/employer and payment of pension benefits by Private Organizations Pension Agency will start, it becomes clear that the new law will not fully enter in to force from the date of its publication. According to article 57 sub article 6(a) of the proclamation, payment of pension contribution starts as of July 8, 2011. Similarly, pension benefits shall commence to accrue as of the next month of one year after the effective date of this proclamation.

Types of Pension benefits

Generally speaking, the private organization employees pension proclamation provides for four categories of pension benefits. These are;

  1. Retirement benefits
  2. Invalidity benefits
  3. Incapacity benefits
  4. Reimbursement of contribution

Except for the fourth one each type of pension benefit includes for two kinds of pension payments. Accordingly, retirement benefit includes retirement pension and retirement gratuity. An employee qualifying for invalidity benefit will be entitled to get either invalidity pension or invalidity gratuity. Lastly pension payment for incapacity benefit may be incapacity pension or incapacity gratuity.

Factors determining the type of pension benefits

Entitlement to any of the pension benefits and payments is dependent upon some specific conditions laid down by the proclamation.

These may be broadly mentioned as length of service, ground of termination of employment contract and the degree of employment injury. The grounds of termination of employment contract could those mentioned in the proclamation (“pension law grounds) and those not mentioned in the proclamation (“non-pension law grounds”)

There are three main grounds of termination of employment mentioned by the pension proclamation. These are attaining retirement age, incapacity due illness or sickness (the specific term used by the proclamation is “health problems”) and incapacity due to employment injury. Resignation is also mentioned as one ground of termination with its own special effect as regards entitlement to reimbursement of the employee’s contribution or pension payment depending on the length of service.

Once the pension law grounds become clear, it will not be very difficult to identify the non-pension law grounds or grounds not mentioned in the pension proclamation. To the exclusion of the above ground, any ground of termination of employment contract will be considered as non-pension law ground.

In general terms, retirement benefits are to be paid to an employee who attains retirement age, which is 60 years. Once an employee has reached the retirement age he will be paid either retirement pension or retirement gratuity depending on his length of service. Pension benefit for invalidity is paid for an employee who is unable to engage in any type of remunerated work due to illness or sickness caused by factors not related to his work or work place. Depending on the length of service of the employee, the pension benefit to be paid could be either invalidity pension or invalidity gratuity. Lastly, incapacity benefit refers to payments to be made to an employee for total or partial loss of capacity to work caused by employment injury. Article 27 sub 1 of the proclamation defines employment injury as occupational accident or occupational disease. For an accident or disease to be considered as occupational the cause should generally be related to the type of work performed by the employee or his work place. An employee totally or partially incapable of performing work will be entitled to get incapacity pension or incapacity gratuity. Unlike retirement pension and invalidity pension, pension for incapacity i.e. incapacity pension or incapacity gratuity will be paid to the employee without any minimum requirement of length of service. The extent and degree of incapacity will be taken in to consideration to determine whether the employee is entitled to incapacity pension or incapacity gratuity.

Difference between pension and gratuity

As indicated in Article 46 and 47 of the proclamation, the main difference between pension and gratuity lies in the fact that pension is paid monthly for life i.e. until death of the employee whereas, gratuity is paid in the form of lump sum i.e. it is a one time payment. The amount to be paid for gratuity is also less than the pension payment.

Calculation of the amount of payment for pension and gratuity

The specific amount of payment an employee is entitled to get is calculated based on his salary, length of service and percentage provided in the proclamation.

Accordingly, the amount to be paid for retirement pension and invalidity pension is 30% of the average salary of the employee for the last three years preceding retirement plus 1.25% for each year of service beyond 10 years. However, the amount could not exceed 70% of the average salary of the employee for the last three years preceding retirement.

A fixed rate is provided to calculate the amount of incapacity pension.  According to article 36 of the proclamation, an employee entitled to get incapacity pension will be paid 47% of his salary which he was receiving during the month of prior to the occurrence of the injury.

The amount of pension gratuity and invalidity gratuity is the same. According to article 21 this will be calculated by multiplying 1.25 month salary of the employee preceding retirement or incapacity by the number of years of service. Here, 1.25 month salary is to mean one month salary and the salary for quarter of a month which is approximately 7.5 days salary.

As it is the case with incapacity pension, the law also provides a fixed rated for the calculation of incapacity gratuity. As indicated in Article 47, incapacity gratuity is equal to 47% of the monthly salary of the employee which he was receiving during the month prior to the occurrence of the injury multiplied by sixty again multiplied by the percentage of injury sustained.

The following table tries to provide a brief summary of the types of pension benefits and the conditions for entitlement by the employee

DOWNLOAD Types of Pension Benefits Table

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