Increased NSSF Contributions to Impact Salaried Kenyans, KPMG Cautions.
KPMG, a UK-based audit firm, has cautioned that the recent increase in National Social Security Fund (NSSF) contributions will have significant financial implications for salaried Kenyans.
The firm disclosed on Friday, February 7, that beyond reducing employees’ net monthly income, the statutory deduction will also diminish the purchasing power of most workers.
Under the NSSF Act of 2013, individuals governed by the Employment Act who are at least 18 years old and below the retirement age must contribute 6% of their pensionable earnings to the Fund.
The government has raised monthly contributions from Ksh2,160 to Ksh4,320, reducing employees’ take-home pay starting this month as part of the Act’s phased implementation.
The Act introduces two contribution tiers: Tier One, applicable to pensionable earnings up to the lower earnings limit, and Tier Two, which applies to earnings exceeding that threshold.
The lower earnings limit has increased from Ksh7,000 to Ksh8,000, while the upper earnings limit has been raised to Ksh72,000, requiring employees in this category to contribute more. Employers must remit these deductions by the 9th day of the following month.
Legal Challenges and Supreme Court Ruling
Despite being enacted in 2013, the Act was only enforced in 2024 following a protracted legal battle. The Kenya Tea Growers Association (KTGA) had filed a petition challenging certain provisions of the Act, delaying its implementation for a decade.
However, on February 21, 2024, the Supreme Court upheld an earlier Court of Appeal decision that overturned the Employment and Labour Relations Court’s ruling, which had declared the NSSF Act unconstitutional.
KPMG highlighted that employers would also be adversely affected by the increased NSSF contributions.
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They are expected to face higher staffing costs and greater compliance burdens, particularly in conjunction with other statutory deductions like the Social Health Insurance Fund, the Affordable Housing Levy, and the revised upper PAYE bands.
However, KPMG acknowledged a potential upside to the revised NSSF contributions. The firm pointed out that the increase could lead to a higher national savings rate and boost individual pension savings, benefiting the long-term financial security of workers.
Increased NSSF Contributions to Impact Salaried Kenyans, KPMG Cautions.
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