News FlashesFebruary 17, 2023

CRS News Flash 15 February 2023 – KENYA – Implementation of new NSSF rates

FEBRUARY 2023 – KENYA
IMPLEMENTATION OF NEW NSSF RATES
It is important that employers note the following:Implementation of the National Social Security Fund (NSSF) Act No. 45 of 2013Since the amendment of the National Social Security Fund (NSSF) Act through Act No. 45 of 2013, there have been several legal and political setbacks that resulted in the new NSSF rates, and specifically, the rule that employers must match the employee’s contribution was never fully implemented.

After the court of appeal finding that the Employment and Labour Relations Court (ELRC) made a mistake in declaring the Act unconstitutional when it had no jurisdiction to question validity of the law as that was a preservation of the High Court, it ruled that the Act is legal, allowing the government to move forward in implementing it.

The new NSSF rates are effective from February 2023. A statement released by the NSSF on 7 February 2023 stated that employers and employees falling under the tier one category will each contribute Sh360 to the fund monthly, up from Ksh200. The NSSF has asked all employers to comply with the NSSF Act No. 45 of 2013, which is set to increase the minimum monthly deductions, last reviewed in 2001.

The 2013 law also states that formally employed Kenyans will make monthly contributions of 6% of their gross salary – a figure which the employer will match.

According to the NSSF Act, the deductions will be applied in different categories; the upper earnings limit (UEL) is for employees who earn Ksh18,000 and above, while the lower earnings limit (LEL) is for those who earn below Ksh6,000.

The pension contribution will be 12% of the pensionable wages, made up of two equal portions of 6% from the employee and 6% from the employer, subject to an upper limit of Ksh2,160 for employees earning above Ksh18,000.

Employees earning between Ksh3,000 and Ksh6,000 will pay contributions in the Tier 1 category only. In contrast, those in the UEL category will contribute to the Tier 1 and 2 categories. Tier 2 is calculated as the contribution balance for earnings between Ksh6,000 and Ksh18,000.

For employees earning between Ksh3,000 and Ksh4,500, the amount of their monthly deduction will be Ksh360.

The rates to be implemented as per the 1st year of the Third Schedule of the NSSF Act:

The Third Schedule of the NSSF Act also stipulates the following:

1. “The lower earnings limit and the upper earnings limit shall, for the first four years after the commencement date, be in accordance with the Table contained in this Schedule.
2. After the fourth year and thereafter-
(a) the Lower Earnings Limit shall be, for each financial year, the amount gazetted by the Cabinet Secretary from time to time as the average statutory minimum monthly basic wage for the top urban centres, second tier urban centres and rural areas for the year; and
(b) the Upper Earnings Limit shall, for each financial year, be the level of earnings equal to four times National Average Earnings.”

Table defining progression of rates of contributions

To download the computation guidelines and sample computations, follow the link.

To view the National Social Security Fund Act No. 45 of 2013, follow the link.

 

Contact our legislation team on info@crs.co.za if you require any additional information.
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