1. Introduction: Legislative Framework for Pension Entitlements
This article outlines the comprehensive provisions related to “Period of Service and Retirement Age.” It also covers “Retirement Pension and Gratuity” under two important Ethiopian legislative instruments. These are Proclamation No. 1268/2022, concerning Private Organization Employees’ Pension, and Proclamation No. 1267/2014, regulating Public Servant Pension. The subsequent analysis offers a comparative exposition of these entitlements. It elucidates the criteria for eligibility. It also explains the methodologies for calculation and other salient stipulations. These govern pension benefits across the private and public employment sectors.
2. Provisions under Proclamation No. 1268/2022: Private Organization Employees’ Pension
2.1. Part Four: Period of Service and Retirement Age
2.1.1. Commencement of Period of Service (Article 16)
The period of service for an employee within a private organization starts on the precise date of their employment. At this point, coverage under the designated pension scheme begins. Service rendered by an employee of a private organization to public offices is acknowledged. This is applicable if the public offices had a pre-existing pension scheme. The service will be counted from the date pension contributions started. To accurately count this antecedent service, the Public Servants Pension Scheme’s administrative authority must transfer the employee’s personal records. This transfer to the Private Organizations Employees’ Pension Scheme must occur within a month.
The modalities for transferring pension contributions between funds will be defined later. This applies to transfers between the Public Servants Pension Fund and the Private Sector Employees’ Pension Fund and vice-versa. Directives issued by the National Bank will provide details specifically on counting service accurately.
2.1.2. Calculation of Period of Service (Article 17)
The period of service shall be computed with meticulous precision. It will be calculated in complete years, months, and days. All services rendered within a private organization that has been covered by the Pension Scheme are mandatorily encompassed within the aggregate period of service. Additionally, the following specific periods shall be duly recognized and counted as qualifying service for any employee:
- Any period of service during which employment was demonstrably interrupted, yet salary payments remained uninterruptedly effected.
- Any period of service expended in any public body by an individual serving as a duly elected member of a public or labor union.
- Any period of service undertaken, pursuant to an official governmental decision, within an international organization.
For the latter two aforementioned categories of service (i.e., service as elected members or in international organizations), these periods shall be duly recognized and counted solely contingent upon the employee’s direct payment of the requisite contributions, encompassing both the employee’s and the employer’s share, or by ensuring that the employer effects such payments on their behalf.
It is explicitly stipulated that service rendered by naturalized Ethiopian citizens in any private organization covered by the pension scheme prior to their formal naturalization shall not be counted for pension purposes, this provision being enacted without prejudice to the binding terms of any international agreement to which Ethiopia is a signatory party.
In instances where an employee, having previously received a retirement or invalidity gratuity, is subsequently re-employed by a private organization falling under the purview of the scheme, their former period of service shall be duly aggregated with their new period of service, provided that the previously disbursed gratuity is fully reimbursed. Similarly, if an individual to whom a reimbursement of pension contribution has been made is subsequently re-employed by a private organization covered by the scheme (prior to attaining the prescribed retirement age), their former period of service shall be counted on the condition that the reimbursed contribution is fully repaid, along with accrued interest calculated at the prevailing bank deposit interest rate.
Furthermore, it is provided that the Council of Ministers, acting upon comprehensive studies and recommendations submitted by the Administration, may resolve that periods of service expended in hazardous occupations or employments involving demonstrable risk to health and life be quantitatively reckoned at a factor of up to twice the actual duration of service rendered.
2.1.3. Retirement Age (Article 18)
The prescriptive age for the superannuation of an employee shall be sixty (60) years, this determination being based solely upon the date of birth as originally registered at the time of their initial employment. Any subsequent evidence adduced for the purpose of altering or modifying the pre-registered age or date of birth (as initially recorded during registration or subsequent notifications of change) shall not be accepted for the purpose of pension calculation or retirement age determination.
Notwithstanding the general retirement age, the Council of Ministers, acting upon studies commissioned and submitted by the Administration, may definitively determine a higher age of superannuation (i.e., exceeding 60 years) for specific professions that are deemed to merit special consideration. Conversely, the Council of Ministers, likewise acting upon comprehensive studies from the Administration, may judiciously resolve upon a retirement age lesser than 60 years for employees of private organizations engaged in hazardous employments or occupations demonstrably involving risks to health and life.
2.2. Part Five: Retirement Pension and Gratuity
2.2.1. Retirement Pension (Article 19)
Eligibility for Lifetime Pension:
- An employee of a private organization who has completed a minimum period of ten (10) years of pensionable service and whose contract of employment subsequently terminates shall be eligible to receive a retirement benefit for life upon the attainment of the statutorily prescribed retirement age.
- An employee who has concluded a minimum aggregate period of twenty-five (25) years of service and subsequently separates from service either through voluntary resignation or due to any other causes not explicitly enumerated within the Proclamation, shall similarly be entitled to receive a retirement pension for life, with the commencement of such payments commencing five (5) years prior to the statutorily prescribed retirement age. This early pension provision for 25 years of service shall not extend to an employee whose service is terminated as a direct consequence of disciplinary measures.
Pension for Health Issues Prior to Retirement Age:
- In instances where an employee, whose service was terminated under the aforementioned conditions, is medically certified by a duly constituted medical board as being permanently unfit for any form of remunerated work due to verifiable health problems prior to the attainment of the prescribed retirement age, said employee shall be entitled to receive a retirement pension for life. The commencement of such pension payments shall be from the first month immediately succeeding the formal ascertainment of such medical unfitness.
- Should such an employee subsequently predecease, their legally recognized survivors shall be entitled to the payment of benefits commencing from the first month immediately following the employee’s demise.
2.2.2. Amount of Retirement Pension (Article 20)
Standard Calculation: For any employee who has completed a minimum period of ten (10) years of pensionable service, the retirement pension payable shall be thirty percent (30%) of their average salary, calculated from the final three (3) years immediately preceding their retirement.
Additional Service Increment Calculation: For each additional year of service rendered beyond the initial ten (10) years, the calculated pension amount shall be progressively increased by an additional increment of 1.25% (one point two five percent).
Salary Increase Limitation: In circumstances where an employee received an annual average salary payment that quantitatively exceeded twenty-five percent (25%) of the regular monthly salary upon which pension contributions were consistently paid (specifically, for the month immediately preceding the three years utilized for their pension entitlement calculation), only up to the twenty-five percent (25%) annual average salary payment increment shall be considered for the precise calculation of the three-year average monthly salary used in determining the pension benefit.
Military or Police Service: For a private organization employee who has demonstrably served as a member of the national defense force or the police, their prior service in such capacities shall be meticulously calculated and aggregated with their private organization service in accordance with the prescribed formula stipulated under the Public Servant Pension Proclamation.
Maximum Limit: The total retirement pension determined through the application of the foregoing provisions (Sub-Article 1 to 3) shall under no circumstances exceed seventy percent (70%) of the average salary calculated for the employee’s pension benefit entitlement.
2.2.3. Retirement Gratuity (Article 21)
Eligibility: An employee who has completed a service period of less than ten (10) years and subsequently retires upon attaining the statutorily prescribed retirement age shall be eligible to receive a gratuity.
2.2.4. Amount of Retirement Gratuity (Article 22)
Calculation: The gratuity payable shall be meticulously calculated as the employee’s salary for 1.25 months (one point two five months) immediately preceding their retirement, this figure then being multiplied by the total number of complete years of service rendered.
Salary Increase Limitation for Gratuity: Analogous to the pension calculation methodology, if the employee received an annual average salary payment that quantitatively exceeded twenty-five percent (25%) of the regular monthly salary upon which pension contributions were consistently paid (specifically, for the month immediately preceding the three years utilized for their pension entitlement calculation), only up to twenty-five percent (25%) of that annual salary payment increment shall be considered for the precise calculation of the gratuity amount.
3. Provisions under Proclamation No. 1267/2014: Public Servant Pension
3.1. Part Four: Period of Service and Retirement Age
3.1.1. Commencement of Period of Service (Article 16)
The period of service for a public servant commences from the precise date of employment if the public office or enterprise was encompassed by a pension scheme on that specific date. Conversely, should a public office or enterprise become covered by a pension scheme at a later juncture, service for its employees commences from the date of such formal coverage. Service shall also be duly counted if a public servant, initially covered by a pension scheme, subsequently transfers to a public office or enterprise not covered by such a scheme, provided the individual personally pays the requisite contributions.
Previous service rendered as a public office employee for a definite period or piece of work (exceeding sixty days in duration), or as a daily laborer, shall be counted if the corresponding contributions are paid upon the individual’s formal appointment as a public servant. For a member of the national military or police service, the period of service commences from the date of recruitment, unless such service was terminated as a direct consequence of disciplinary measures. Service rendered as an elected member of parliament, a judge, a public prosecutor, or a member of the defense or police force shall be counted from the date on which they formally became covered by a pension scheme.
3.1.2. Calculation of Period of Service (Article 17)
The period of service shall be meticulously calculated in complete years, months, and days. All services rendered within public offices covered by a pension scheme are mandatorily included. Additionally, the following specific periods shall be duly recognized and counted as qualifying service:
- Any period of service during which employment was demonstrably interrupted, yet salary payments remained uninterruptedly effected.
- Any period of service expended in any public body by an individual serving as a duly elected member of a public or labor union.
- Any period of service rendered in a public office as a temporary worker.
- Any period of service spent in an enterprise where the governmental capital share constitutes less than fifty percent (50%).
- Any period of service undertaken, pursuant to an official governmental decision, within an international organization.
For elected members and service in an international organization, these periods are counted solely contingent upon the public servant’s direct payment of the requisite contributions, encompassing both the employee’s and the employer’s share, or by ensuring that the employer effects such payments on their behalf.
Service rendered by naturalized Ethiopian citizens in any public office covered by the pension scheme prior to their formal naturalization shall not be counted for pension purposes, this provision being enacted without prejudice to the binding terms of any international agreement to which Ethiopia is a signatory party.
In instances where a public servant, having previously received a retirement or invalidity gratuity, is subsequently re-employed by a public office covered by the scheme, their former period of service shall be duly aggregated with their new period of service, provided that the previously disbursed gratuity is fully reimbursed. Similarly, if an individual to whom a reimbursement of pension contribution has been made is subsequently re-employed by a public office covered by the scheme (prior to attaining the prescribed retirement age), their former period of service shall be counted on the condition that the reimbursed contribution is fully repaid, along with accrued interest calculated at the prevailing bank deposit interest rate.
Furthermore, it is provided that the Council of Ministers, acting upon comprehensive studies and recommendations submitted by the Administration, may resolve that periods of service expended in hazardous occupations or employments involving demonstrable risk to health and life be quantitatively reckoned at a factor of up to twice the actual duration of service rendered.
3.1.3. Retirement Age (Article 18)
The prescriptive age for the superannuation of a public servant shall be sixty (60) years, this determination being based solely upon the date of birth as originally registered at the time of their initial employment. Any subsequent evidence adduced for the purpose of altering or modifying the pre-registered age or date of birth shall not be accepted for the purpose of pension calculation or retirement age determination.
For members of the national defense force, their retirement age is determined by the specific law regulating the administration of the defense force. Similarly, for members of the police, their retirement age is determined by the specific law regulating the administration of the police. For other categories of public servants, the general retirement age remains sixty (60) years.
Notwithstanding the general retirement age, the Council of Ministers, acting upon studies commissioned and submitted by the Administration, may definitively determine a higher age of superannuation (i.e., exceeding 60 years) for specific professions that are deemed to merit special consideration. Conversely, the Council of Ministers, likewise acting upon comprehensive studies from the Administration, may judiciously resolve upon a retirement age lesser than 60 years for public servants engaged in hazardous employments or occupations demonstrably involving risks to health and life.
3.2. Part Five: Retirement Pension and Gratuity
3.2.1. Retirement Pension (Article 19)
Eligibility for Lifetime Pension:
- A public servant who has completed a minimum period of ten (10) years of pensionable service and subsequently retires upon attaining the statutorily prescribed retirement age shall be eligible to receive a retirement pension for life.
- A public servant who has concluded a minimum aggregate period of twenty-five (25) years of service and subsequently separates from service either through voluntary resignation or for any other causes not explicitly enumerated within the Proclamation, shall similarly be entitled to receive a retirement pension for life, with the commencement of such payments commencing five (5) years prior to the statutorily prescribed retirement age. This provision for early pension shall not extend to a public servant whose service is terminated as a direct consequence of disciplinary measures.
- A senior government official or a member of parliament who has served at least one full term and has attained the age of fifty (50) years upon leaving office shall be eligible to receive a retirement pension for life.
- If a public servant (excluding senior government officials or members of parliament) whose service was terminated under specific conditions (e.g., due to disciplinary measures) is medically certified by a duly constituted medical board as being permanently incapable of fulfilling remunerated work due to verifiable health problems prior to the attainment of the prescribed retirement age, said public servant shall be entitled to receive a retirement pension for life. The commencement of such pension payments shall be from the first month immediately succeeding the formal ascertainment of such medical unfitness. Should such a public servant subsequently predecease, their legally recognized survivors shall be entitled to the payment of benefits.
- A public servant who separates from service due to the cessation of their public office, workforce reduction, or privatization, and whose service duration and age are not less than twenty-five (25) years and fifty (50) years respectively, shall, upon the decision of the Council of Ministers, be eligible to receive a retirement pension for life.
3.2.2. Amount of Retirement Pension (Article 20)
Standard Calculation: For any public servant who has completed a minimum period of ten (10) years of pensionable service, the retirement pension payable shall be thirty percent (30%) of their average salary, calculated from the final three (3) years immediately preceding their retirement.
Additional Service Increment Calculation: The calculated pension amount shall be progressively increased by an additional increment of 1.25% (one point two five percent) for each additional year of service rendered beyond the initial ten (10) years.
For a senior government official or a member of parliament, the retirement pension for at least one full term of service shall be fifteen percent (15%) of their average salary from the final three (3) years of service, and this amount shall be increased by an additional 1.125% (one point one two five percent) for each year of service rendered beyond five (5) years.
Maximum Limit: The total retirement pension determined through the application of the foregoing provisions shall under no circumstances exceed seventy percent (70%) of the average salary calculated for the public servant’s pension benefit entitlement. The minimum pension amount and any adjustment allowance shall be determined by the Administration based on prevailing living conditions.
Salary Increase Limitation: In circumstances where a public servant received an annual average salary payment that quantitatively exceeded twenty-five percent (25%) of the regular monthly salary upon which pension contributions were consistently paid (specifically, for the month immediately preceding the three years utilized for their pension entitlement calculation), only up to the twenty-five percent (25%) annual average salary payment increment shall be considered for the precise calculation of the three-year average monthly salary.
3.2.3. Retirement Gratuity (Article 21)
Eligibility: A public servant who has completed a service period of less than ten (10) years and subsequently retires upon attaining the statutorily prescribed retirement age shall be eligible to receive a gratuity. An outgoing senior government official or a member of parliament who has served for less than one full term but separates from service after attaining fifty (50) years of age shall also be eligible to receive a gratuity.
3.2.4. Amount of Retirement Gratuity (Article 22)
For a public servant other than a member of the defense force or the police, the gratuity payable shall be meticulously calculated as their salary for 1.25 months (one point two five months) immediately preceding retirement, this figure then being multiplied by the total number of complete years of service rendered.
For a member of the defense force or the police, the gratuity payable shall be their salary for 1.65 months (one point six five months) immediately preceding retirement, this figure then being multiplied by the total number of complete years of service rendered.
For a member of parliament, the gratuity payable shall be their salary for 1.125 months (one point one two five months) immediately preceding separation from service, this figure then being multiplied by the total number of complete years of service rendered.