Employment law
Retirement: Standard pension
The Kati Agro warehouse, Boubacar’s last stocktake. At 58, the head storekeeper counts the sacks of maize one last time, then goes to the human resources office with a single question: “How much will I get?”. The HR manager opens the Social Security Code. The answer comes down to three operations.
Kati Agro and the people mentioned in this article are fictitious: they are used as examples only.
1. What exactly are we talking about?
Kati Agro processes cereals and employs 200 people. Boubacar joined at 45, having never contributed before. At 58, he has thirteen years, i.e. 156 months, of insurance with the National Social Security Institute (INPS).
The standard pension is the retirement pension liquidated at the normal liquidation age, set at 58 (Social Security Code, article 144), by an insured person with at least thirteen years of salaried employment giving rise to contributions (Social Security Code, article 143). It differs from the early pension, liquidated before 58.
On the employment contract side, the retirement age in the private sector is 58 for categories B, C, D and E, and 60 for category A. The employment relationship may continue by mutual agreement until 60 for the former and 62 for the latter (Labour Code, article L.60).
Why two texts? The Labour Code says when the contract ends; the Social Security Code says when and how the pension is paid.
The most common mistake
Confusing the end of the contract with the start of the pension. The pension only takes effect after work has stopped, and only if the application is made in time (article 146).
Thirteen years to qualify, 58 to receive it at the full rate.
2. The calculation in three operations
The Code sets the method (Social Security Code, article 156):
- calculate the average monthly remuneration: the total remuneration subject to contributions over the last eight years before work stopped, divided by 96;
- apply the accrual rate of 2% per year of insurance, i.e. 26% for the minimum thirteen years;
- check the floor: no pension may be calculated on an average remuneration lower than twice the SMIG.
The accrual rate is the percentage of average remuneration earned by each year of insurance. The INPS sums up the method in one formula: pension = average monthly remuneration × 2% × number of years of insurance.
Example. Over his last eight years, Boubacar received XOF 24,000,000 in remuneration subject to contributions.
Average monthly remuneration: 24,000,000 ÷ 96 = XOF 250,000
Floor with a SMIG of XOF 40,000: 40,000 × 2 = XOF 80,000, so not reached
Rate: 13 years × 2% = 26%
Standard pension: 250,000 × 26% = XOF 65,000 per month
The floor, for low wages
Example. Awa, a guard in the same company, has an average monthly remuneration of XOF 60,000.
Average remuneration: XOF 60,000, below the XOF 80,000 floor
Base used: XOF 80,000
Pension: 80,000 × 26% = XOF 20,800 per month
The floor follows the SMIG. A frozen amount, calculated on an old SMIG, underestimates the minimum pension.
What an undeclared bonus costs
Contributions are based on all remuneration, including bonuses, allowances and benefits in kind, except reimbursement of expenses (article 187). A bonus paid “off the payslip” during the last eight years disappears from the calculation.
Example. Boubacar received a monthly performance bonus of XOF 30,000, never declared to the INPS.
Average remuneration with the bonus declared: 250,000 + 30,000 = XOF 280,000
Pension with the bonus: 280,000 × 26% = XOF 72,800
Loss for Boubacar: 72,800 − 65,000 = XOF 7,800 per month, for the whole of his retirement
The pension is calculated on what was declared, not on what was paid.
What you need to do
- Declare all bonuses and benefits in kind to the INPS, every month.
- Reconstruct the last eight years of contributory remuneration before the employee leaves.
- Apply the floor of twice the SMIG in force, not an old amount.
3. What the pension allows, and what it prohibits
Retirement pensions are paid every month, in arrears (article 158). The holder keeps family allowances as of right (article 156). On their death, their survivors are entitled to a survivor’s pension (article 152).
Pensions can be assigned and seized under the same conditions and limits as wages (Social Security Code, article 159). In other words, a creditor may seize part of it, within the same limits as for a salary.
A retiree does not come back as an employee
The liquidation application must be accompanied by an undertaking not to resume salaried activity (Social Security Code, article 155). A retiree therefore cannot be re-hired as an employee. If the company still needs them, it can only engage them as a service provider, i.e. as an independent professional, under a written service contract.
This contract states that the client is not liable for accidents connected with performing the service: the provider is not covered by the INPS accidents-at-work scheme and must insure themselves. The clause does have a limit, however: no one can exclude liability for harm caused to a person or for their own gross misconduct (General Law of Obligations, article 117). And if the retiree actually works under the company’s authority, the contract will be reclassified as an employment contract: the court will give it back its true nature, whatever its title (Labour Code, article L.1).
What you need to do
- Inform the employee, before they leave, of the undertaking not to resume salaried activity.
- Engage a retiree only through a written service contract, never through an employment contract.
- Send the INPS the employee’s family situation so that family allowances are maintained.
4. The departure: what the employer does
On departure, the employer pays a retirement payment, calculated like severance pay on the average monthly salary of the last twelve months (Labour Code, article L.55 and article L.53).
Example. Boubacar has thirteen years of service at Kati Agro and an average monthly salary of XOF 280,000 over his last twelve months.
Years 1 to 5: 5 × 20% = 100%
Years 6 to 10: 5 × 25% = 125%
Years 11 to 13: 3 × 30% = 90%
Payment: 280,000 × 315% = XOF 882,000
The employer may forward the pension application to the INPS within a period not exceeding six months (article 155). The pension takes effect on the first day of the month following the end of work if the application is sent within six months; otherwise, on the first day of the month following its receipt (article 146). Finally, the employer declares the departure to the INPS within eight days (article 163) and issues the certificate of employment (article L.61).
What you need to do
- Calculate and pay the retirement payment on the day of departure.
- Forward the pension application to the INPS on departure, with proof that work has stopped.
- Declare the departure to the INPS within eight days and issue the certificate of employment.
5. A closer look: beyond thirteen years, 2% per year
For longer careers, article 156 provides for an increase of 2% for each twelve-month period “beyond 120 months”. Read on its own, this sentence leads some to count the increase from the eleventh year, on top of the 26%. That is a mistake: the INPS applies 2% per year of insurance, across all years.
Example. An employee leaves at 58 with 25 years of insurance (300 months) and an average remuneration of XOF 250,000.
| Calculation | Rate | Monthly pension |
|---|---|---|
| INPS formula: 2% per year of insurance | 25 × 2% = 50% | XOF 125,000 |
| Mistake: 26% plus 2% per year beyond 120 months | 26% + 15 × 2% = 56% | XOF 140,000 |
The mistake overstates the pension by XOF 15,000 per month and distorts any advice on leaving. The INPS formula is consistent with article 198, which targets a pension of 80% of average salary for 40 years of work (40 × 2% = 80%). See also our article Old-age pension.
Key takeaways in 6 points
- Check the two conditions for the standard pension: thirteen years of insurance and age 58.
- Calculate the average monthly remuneration over the last eight years, dividing the total by 96.
- Apply 2% per year of insurance, i.e. 26% for thirteen years, without going below a base of twice the SMIG in force.
- Declare all bonuses and benefits: what is not declared does not count for the pension.
- Pay the retirement payment and send the application to the INPS within six months.
- For a longer career, do not count the increase from the eleventh year: 25 years of insurance give 50%, not 56%.