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A Praxima client recently sought guidance on when mandatory pension contributions should cease for employees in Ethiopia. To provide clarity, our tax manager reviewed the Private Organization Employees’ Pension Proclamation No. 1268/2022, the key legislation governing private-sector retirement benefits and contribution timelines.
The Proclamation sets out clear rules on retirement age, contribution requirements, and exceptions for specific professions or work environments.
Under Article 18(1) of the Proclamation, employees in private organizations must retire at 60 years of age. This age is determined using the date of birth recorded at first employment, ensuring a consistent and verifiable reference point. (Art. 18(1), Private Organization Employees’ Pension Proclamation No. 1268/2022)
Ethiopia’s pension rules require contributions until age 60, with only limited exceptions. Correctly applying retirement age criteria is essential for maintaining full compliance with Proclamation No. 1268/2022.
While age 60 is the standard, the law recognises that certain occupations may require flexibility.
1. Higher Retirement Age
The Council of Ministers has the authority to establish a higher retirement age for roles requiring special consideration (Art. 18(3)).
2. Lower Retirement Age
A reduced retirement age may apply to employees who work in hazardous or high-risk environments (Art. 18(4)). This recognises the increased physical demands and long-term health implications of certain jobs.
Employees with at least 10 years of service are entitled to lifetime retirement benefits once they reach the prescribed retirement age (Art. 19(1)).
Employees may receive benefits before age 60 in specific cases outlined in sub-articles (2) and (4). (Art. 19(2), 19(4))
Regardless of early exit, retirement benefits are only paid once the employee reaches official retirement age, unless a recognised early retirement condition applies.
In summary:
