Kenya's National Social Security Fund (NSSF) has announced new contribution rates that were agreed upon by the State agency’s board of trustees and the Federation of Kenya Employers (FKE) following a Court of Appeal ruling on February 3, 2023. The new rates, which are set to take effect from the February 2023 payroll, will replace the previous flat rate of Ksh.200 that all employees previously contributed.
What are the new rates?
Under the new NSSF Act 2013, an employee will now be required to contribute 6% of their salary to the NSSF, while their employer will match that contribution with another 6%. This means that employees earning Ksh.6,000 per month will now be deducted Ksh.360 per month, while their employer will pay a similar amount, making it a total of Ksh.720. Meanwhile, an employee in tier II earning Ksh.18,000 and above per month will pay Ksh.1,080, with their employer contributing an additional Ksh.1,080, making it a total of Ksh.2,160.
How has the reception been?
FKE, which had initially expressed hesitance about the implementation process and timeline, has now issued an advisory to its members to effect the changes as soon as possible. The employers have been advised to deduct and remit the monthly contributions to the NSSF by the 9th day of every month.
The new contribution rates have been welcomed by the Secretary General of Central Organization of Trade Union (COTU), Francis Atwoli noting that the move will provide Kenyan workers with a much-needed social security net. "Social security is a human right that focuses on addressing the universal need for protection against certain life risks and social needs," said Atwoli. Atwoli also noted that the previous provident fund system, which offered a lump sum payment for tier 1, left many workers exposed to old age poverty with no social security covering them. Under the new NSSF system, however, workers will be entitled to both provident fund tier 1 and pension fund tier II benefits.
While an employer may opt out of tier II for a better scheme, Atwoli emphasized that Kenyan workers will now be entitled to monthly benefits as they will have contributed to the pension fund under NSSF. "Over and above the lump sum payment received at ago after retirement from NSSF, Kenyan workers will be entitled to monthly benefits as they would have respectively contributed under tier II," he added.
While most citizens have argued against the change in NSSF rates, some government stakeholders are of the idea that implementation of the new NSSF contribution rates is set to have a significant impact on Kenya's workforce, providing workers with a more comprehensive social security net and helping to address the issue of old age poverty.
What’s Next for Employers?
Now that the new rates have been made law, employers are expected to comply as from this month moving forward or they will face penalties. Adjusting to the new NSSF rates can pose a challenge but not if you’re using our FaidiHR platform. One of our main goals is usually to help companies stay compliant with both existing and new labour laws in the ountry. Reach out to us via WhatsApp/Call on +254 746 428 844 or email email@example.com. Request a demo now: https://bit.ly/3qFOzAd.