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.
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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;
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”)
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