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Economy

Exiting MPs to wait longer for their gratuity, pension payout

Salaries and Remuneration Commission chair Sarah Serem and vice-chair Daniel Ogutu. FILE PHOTO  | NMG
Salaries and Remuneration Commission chair Sarah Serem and vice-chair Daniel Ogutu. FILE PHOTO | NMG 

MPs’ quest for speedy payment of their end-of-term packages has been delayed to enable their employer to decide whether they are entitled to a gratuity or a lifelong pension.

Director of Pensions Shem Nyakutu said the gratuity or end-of-term payments will only be paid once the Salaries and Remuneration Commission (SRC) and the Parliamentary Service Commission (PSC), the MPs’ employer, have agreed on which of the two retirement packages will apply to legislators exiting after a single or more terms in Parliament.

“The law does not allow us to pay MPs both a gratuity and pension. They have to choose one, and this is also the advice of the SRC,” Mr Nyakutu said in an interview.

The Treasury had set aside Sh2.8 billion in the budget as gratuity cash, guaranteeing each MP Sh6.7 million at the end of his or her term.

Bruising campaigns

Members of the 11th Parliament — emerging from bruising and expensive campaigns — have been pushing for speedy payment of the cash, which has now been stopped pending a decision on what package they deserve.

MPs, who have served two terms and whose last salary stood at Sh710,000, are guaranteed a lifelong pension of Sh125,000 per month, but some members of the 10th Parliament also managed to walk away with gratuity cash.

Now the SRC, with the backing of the pensions department, wants MPs to pick either gratuity payments or monthly pension.

The pensions department said a legal lacunae saw members of the Ninth and 10th parliaments get paid both pension and gratuity — a position that is not sustainable in law.

MPs contribute 12.75 per cent of their salaries for pension, while the government contributes a similar amount.

Lawmakers who serve two terms in Parliament are entitled to pension for the rest of their lives while those who do not make a second term get a refund equivalent to the amount contributed.

Mr Nyakutu said the pensions department is this week expected to meet the Treasury and Parliamentary Service Commission to decide what the MPs will be paid.

“The meeting should decide which of the two packages will apply or leave it to each MP to choose one.”

Arm-twisted SRC

The payout will bring to a close the four-and-a-half-year bonanza that the MPs — including senators and members of the National Assembly — have been enjoying since they arm-twisted the SRC to let them earn unlimited allowances from committee sittings.

The term of the 11th Parliament drew to a close on the midnight of August 7, paving the way for the election of the 12th Parliament on August 8, 2017.

Mr Nyakutu said the Sh2.8 billion allocated for gratuity in the current budget was “done as a pre-cautionary measure.” It would take 51 years for a Kenyan — whose average income stood at Sh131,504 last year — to make the Sh6.7 million that each MP will take home in gratuity payments.

The service gratuity amounts to nearly 80 per cent of an MP’s annual basic pay, which has grown to Sh8.5 million.

The one-off compensation was one of the key items that remained unresolved after the legislators forced the SRC to give them a fresh pay package with no ceilings on allowances.

The SRC in March 2013 gazetted a remuneration package for MPs that included a gratuity benefit calculated at the rate of 31 per cent of annual basic pay to be paid at the end of term.

The pay schedule also capped allowances, infuriating the legislators who managed to have the SRC issue a new pay structure that left their allowances open-ended.

The SRC said at the time that differences over the payment of gratuity had not been resolved and promised to release an advisory at a later date.

“Payment of service gratuity to be advised at a later date by the Salaries and Remuneration Commission,” the commission wrote to National Assembly Speaker Justine Muturi in the June 11, 2013 letter detailing the revised pay package of MPs.

The SRC in July gazetted a new pay structure for MPs that will run from 2017 to 2022, cutting the monthly salaries to Sh621,000 down from Sh710,000. There are 349 MPs and 67 senators in Parliament.

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