NSSF plans new round of job cuts in tight cost goals
National Social Security Fund (NSSF) Managing Trustee Tom Odongo. Photo/FILE
What you need to know:
Managing trustee Tom Odongo says the firm will cut its payroll further after shedding 315 jobs since April through a voluntary retirement plan.
NSSF 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.
The fund had about 1,700 employees in December and its administrative costs in the year to June 2011 stood at Sh5.2 billion.
The National Social Security Fund (NSSF) will shed jobs for the second time in three months to reduce operating expenses and lift returns paid to retirees.
Managing trustee Tom Odongo says the firm will cut its payroll further after shedding 315 jobs since April through a voluntary retirement plan.
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 closed voluntary early retirement but we are still doing staff rationalisation and I am not ruling out more exits,” said Mr Odongo.
“We will soon decide on how many more to release. We have committed to cut the ratio to less than two per cent,” said Mr Odongo, adding that the fund will save Sh1.5 billion annually in wages from the first phase of the job cuts.
The fund had about 1,700 employees in December and its administrative costs in the year to June 2011 stood at Sh5.2 billion compared to Sh6.8 billion remitted by workers in the same period. This means that only Sh47 out of every member’s monthly contribution of Sh200 was invested in the year 2011.
Employee expenses were more than Sh2.6 billion, which amounted to half of the cost of managing the fund. These are the ratios that Mr Odongo is seeking to reverse in the fund’s quest to pay contributors a double-digit return from the current 7.5 per cent. The fund recently installed a Sh300 million IT system to help cut costs and enhance efficiency.
It is set to partner with Kenya Revenue Authority to help in collection of contributions in an agency business model that will ultimately reduce its countrywide branch network.
“We are partnering with banks and operators like Airtel and Safaricom instead of us having branches everywhere,” said Mr Odongo. The outsourcing is expected to seal leakages while cutting costs on space rentals, personnel and logistics.
The cost-cutting drive comes ahead of this week’s publication of the new NSSF Bill, which seeks to convert the provident fund into a pension scheme and raise monthly fees equally met by workers and employers to a high of Sh18, 450 from the current Sh400.
By converting to a pension scheme, NSSF will be obliged to make monthly payments to retirees unlike the case now where it pays a measly lump sum on retirement.
The Bill requires administrative expenses be below two per cent of its total assets for the first five years of becoming law, about half of the present ratio.
It demands a further cut in the ratio of administrative expenses to total assets to 1.5 per cent from the sixth year, signalling a deepening in the cost management drive. The Bill also bars NSSF from transferring its liabilities to the new scheme.
The liabilities have been systematically reduced from Sh20 billion five years ago to Sh4.6 billion through settlement of court cases.
