On July 8, new legislation went into effect that extends coverage to private-sector workers under Ethiopia's pay-as-you-go, earnings-related social insurance program. Previously, the program covered only public-sector workers, including military and police personnel. The regulations governing pensions for private-sector workers are identical to those governing public-sector pensions, but a separate, newly created agency (Private Organization Employees Social Security Agency) administers private-sector pensions. In the future, the government hopes to expand coverage in the program to workers in the informal sector (such as domestic workers).

Under the new legislation, contribution rates for private-sector workers are initially 5 per cent of salary for employees and 7 per cent for employers, but will increase by 1 per cent annually until reaching 7 per cent for employees (by 2013) and 11 per cent for employers (by 2015). (Contribution rates for public-sector workers are already 7 per cent for employees and 11 per cent for employers.) To receive an old-age pension, workers (both in the public and private sectors) must be aged 60 or older and have at least 10 years of contributions. At retirement, the old-age pension is equal to 30 per cent of a worker's average monthly salary in the last 3 years before retirement, plus 1.25 per cent for each year of service exceeding 10 years (up to a maximum of 70 per cent of the worker's average monthly salary).

Source: Social Security Programs Throughout the World: Africa, 2009, US Social Security Administration; "New Pension Includes Private Sector," Addis Fortune, June 12, 2011; "International Headlines," Mercer, June 22, 2011.

Implementation date: 07.2011