New NSSF Act has grey areas that make it difficult for employers to process staff payrolls.
Human resource experts who attended a seminar in Nairobi on Thursday also said it is unclear how companies that have in-house retirement savings schemes should treat employee salaries in compliance with the new law.
Deloitte has faulted ambiguous clauses in the new NSSF Act that it says could make it hard to implement the law on workers’ retirement savings.
The financial services consulting firm says the new National Social Security Fund (NSSF) Act has several grey areas that will make it difficult for employers to process staff payrolls unless they are clarified.
Human resource experts who attended a seminar in Nairobi on Thursday also said it is unclear how companies that have in-house retirement savings schemes should treat employee salaries in compliance with the new law.
The NSSF Act which became operational on January 10 gave employers with private retirement schemes 60 days to confirm whether they would apply for approval to continue under their old plans or make all contributions to the NSSF exclusively.
Companies with staff across the country were also at a loss on what minimum wage would apply since statutory minimum wages are based on the location of an employee.
“Under the law, an employer could make some 48 different calculations because the minimum wage is dependent on the location. This is going to be quite a rough task for employers and some simplification is needed,” said Nikhil Hira, a tax partner at Deloitte Consulting.
Mr Hira said regulations need to come up with a single minimum wage figure for the entire country, which can then be used in making calculations of the pension contributions under the new Act.
Richard Nyakundi, a research and development officer at the NSSF, said some of the shortcomings of the current Act could be addressed administratively or through the operationalisation rules.
The regulations, he said, are expected to give effect to the new Act but are yet to be gazetted.
“As of now we have to implement the law as it is. If there are any particular issues that affect an employer we can discuss on how to go about resolving them. Otherwise regulations should make the law clearer once they are published,” said Mr Nyakundi.
Others faulted the Act for lacking clarity on what the company is to do should the Retirement Benefits Authority (RBA) fail to process the application for exemption from the Act within the 60-day period provided in the law.
The law requires an employer to apply to the RBA to be allowed to keep its employees in an occupational scheme rather than migrate them all to the NSSF scheme.
Terms and conditions to be in the occupational schemes include payment of more than 12 per cent of wages to the scheme.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
