1. Introduction: Overview of Superannuation Benefits
The comprehensive legal provisions for “Retirement Pension and Gratuity” are detailed in Part Five. This is in the Private Organization Employees’ Pension Proclamation No. 1268/2022. This section specifically addresses the conditions for eligibility. It explains the methodologies for calculation. It also covers the various stipulations related to the disbursement of retirement benefits. This includes both lifetime pensions and gratuities for employees within the private organizational sector of Ethiopia.
2. Retirement Pension (Article 19)
2.1. Eligibility for Lifetime Pension
An employee of a private organization who has completed a minimum period of ten (10) years of pensionable service shall be eligible to receive a retirement benefit for life. This eligibility begins upon the attainment of the statutorily prescribed retirement age. Furthermore, an employee who has concluded a minimum aggregate period of twenty-five (25) years of service may separate from service. This could be through voluntary resignation or other causes not enumerated within the Proclamation. Such an employee is entitled to receive a retirement pension for life. Payments commence five (5) years prior to the statutorily prescribed retirement age. However, it is explicitly stipulated that the provision for early pension entitlement based on twenty-five years of service shall not apply. This rule excludes employees whose service ends due to disciplinary measures.
2.2. Pension for Health Issues Prior to Retirement Age
If an employee’s service was terminated under the aforementioned conditions and they are medically certified by a duly constituted medical board, then they are permanently unfit for any form of remunerated work. This must be due to verifiable health problems prior to reaching the prescribed retirement age. In such a case, the employee shall be entitled to receive a retirement pension for life. Pension payments will start from the first month after the formal confirmation of 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.
3. Amount of Retirement Pension (Article 20)
3.1. Standard Calculation Methodology
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. This average is calculated from the final three (3) years immediately preceding their retirement.
3.2. 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).
3.3. Salary Increase Limitation for Pension Calculation
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.
3.4. Recognition of 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.
3.5. Maximum Pensionable 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.
4. Retirement Gratuity (Article 21)
4.1. Eligibility for Gratuity
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.
5. Amount of Retirement Gratuity (Article 22)
5.1. Gratuity Calculation Methodology
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.
5.2. Salary Increase Limitation for Gratuity Calculation
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.