NSSF opens fresh round of job cuts in cost goals

The National Social Security Fund (NSSF) will shed jobs for the second time in 18 months to reduce operating expenses and lift returns paid to retirees.

Managing trustee Richard Langat said the pension scheme has opened a fresh round of voluntary early retirement to employees after shedding 312 jobs at a cost of Sh1.2 billion in April 2013.

The pensioner’s administrative costs have remained above the targeted two per cent of its total assets, reducing the amount of cash available for investments and ultimately squeezing retirees’ returns.

“We have now opened another window for those wishing to take voluntary early retirement this financial year,” Mr Langat said in an interview with the Business Daily.

“This will help us manage costs.”

The fund currently has 1,399 employees and its administrative costs in the year to June 2013 grew by a fifth to Sh6.4 billion compare to Sh7.8 billion remitted by workers in the same period.

The total operating costs represent 4.8 per cent of total net assets recorded at Sh134.9 billion over the period – more than double the set target of two per cent.

This means that 82 per cent of collections are used in operating expenses or Sh165 out of every members’ monthly contribution of Sh200, leaving only Sh35 for investment.

“We incurred a Sh1.2 billion cost in voluntary early retirement where 312 employees left, mostly mid-level managers. If you isolate this, it brings us closer to the set costs ratios,” Mr Langat said.

Employee expenses account for most of NSSF’s administrative expenses as well as half of the cost of managing the fund.

These are the ratios that Mr Langat is seeking to reverse in the fund’s quest to consistently pay contributors a double-digit return from the current 12.5 per cent up from 7.5 per cent in the year to June 2012.

NSSF said the mid-level managers who voluntarily exited last year earned an average of Sh200,000 per month.

In their place, the fund has hired 30 graduate management trainees with a starting salary of Sh80,000 a month.

“The young trainees are flexible, cheaper creative and will drive growth.”

The fund recently installed a Sh300 million IT system to help cut costs and enhance efficiency.

The taxman from November started collecting the NSSF contributions, setting the stage for cost-cutting at the worker’s pension fund.

Kenya Revenue Authority will start with a selected number of employers. The partnership will pave the way for cost cutting measures at NSSF, including layoffs and closure of offices, saving the fund millions of shillings.