23 June 2014

Kenya: FKE Stands Firm On Tier Two Deductions

The Kenya Federation of Employers will stick to its position on remittance of contributions for Tier Two to the National Social Security Fund pending determination of court cases.

This is even as the Revenue Benefits Authority published a notice stating that regulations for employers wishing to contract out of the NSSF for Tier Two deductions were gazetted on June 13.

RBA said employers with private arrangements can now apply to it to opt out.

However, the FKE rebuffed the notice, saying the delayed gazettement of the regulations will temporarily lock in all employers on Tier Two contributions, as it will take up to two months for the certificate to be granted.

"An employer who applies today (Friday) will get a certificate on August 20 while the deadline for remitting is July 15. This will lock them in against their will," executive director Jacqueline Mugo said on phone Friday.

"It's a matter before the courts ... and we cannot comment further until it is resolved."

She however reiterated that employers have no issue with Tier One contributions.

Implementation of the NSSF Act 2013 has however been deferred pending determination of an estimated 28 separate court cases countrywide.

The mandatory Tier One monthly deductions range from a minimum of Sh360 to a maximum of Sh1,080 for employees in the formal sector in the first year of implementation. Employers are supposed to match staff deductions with equivalent amounts.

Previously, employees were required to contribute a blanket Sh200, also matched by the employers.

The new Act provides two options for Tier Two deductions. Employers are required to either remit to the NSSF or private occupational pension schemes 60 days after successfully applying to the RBA for approval.

Tier One deductions will rise to Sh420 in the second year, then to Sh480, Sh540 and Sh600 in the subsequent years. Tier Two contributions have been pegged at a maximum of Sh720 in the first year, increasing to Sh1,740, Sh3,840, Sh5,980 and Sh8,040 in subsequent years.

Enforcement of the new NSSF Act was earlier scheduled for January 10, 2014, but was deferred to May 31 to give time for employers to comply.

"The four months' reprieve was on understanding that the NSSF rules and regulations would be issued immediately to give give employers adequate time to opt out of Tier Two contributions," the employers lobby group said in a statement earlier on Friday.

"We wonder on what basis the NSSF is asking employers to make those remittances," FKE said.

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