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In the previous (now repealed pension law) the amount of pension contribution by public servants including military and police officers was 4% of their gross salary.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According to article 5 and 6 of the repealed Public Servants’ Pensions Proclamation No. 345/2003 the contribution of the government to public servants pension was 6% whereas it was 16% for military and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 1/4^th 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 1^st 2^nd 3^rd and 4^th 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.

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