6 January 2014

Kenya: Employers Not Ready for New NSSF Act

EMPLOYERS have not been advised to collectively factor the increased contributions to their employees' statutory pension scheme in their financial plans even as the National Social Security Fund Act 2013 became law on December 24.

Federation of Kenya Employers, the employers umbrella body, said it will advise members when the NSSF board issues actual payment structure.

FKE executive director Jacqueline Mugo however warned they will not allow implementation to be hijacked by any other state department or agency other than the NSSF board.

The NSSF Act, signed into law by President Uhuru on Christmas eve, requires employers to progressively increase contributions to their employees' NSSF pension scheme from the present uniform Sh200 a month over five years.

They are expected to contribute 1.2 per cent of their employees' pensionable salary in the first year (this year), doubling to 2.4 in the second, 3.6 per cent in third year, 4.8 per cent in the fourth and six per cent in 2018.

This will be matched with equal deductions from the employees' monthly pay. Mugo however said she does not expect the share of employers' contribution to exceed Sh360 this year, saying a sharp jump could inconvenient most of them.

If the FKE wish is granted, it will affect high end earners. Those earning Sh100,000 monthly salary, for example, will see their employers remit much less than the Sh1,200 contributions as per the NSSF Act. The new law is expected to be gazetted any time by Labour secretary Kazungu Kambi.

"We don't expect our contributions...to go beyond Sh360 immediately (after the gazettement of the new law) from the current Sh200 but we will gradually target the six per cent requirement in five years," Mugo said in a telephone interview on Friday. "A lot of awareness need to be done and we need a clear communication from the NSSF on structure of payment."

The new NSSF pension scheme was supported by FKE and umbrella workers' union Cotu, both members of the NSSF board, while Kenya National Union of Teachers opposed it.

Its implementation is expected to shore up national savings that has stuck at 18 per cent of the GDP, far below Vision 2030's target of 30 per cent.

Deputy President William Ruto said on December 10 that savings through the scheme will also help workers secure long term funding including the hugely under-performing mortgages currently at a dismal 20,000 accounts.

Copyright © 2014 The Star. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.