Employers seek January extension for new NSSF rates
Federation of Kenyan Employers executive director Jacqueline Mugo. Photo/FILE
What you need to know:
FKE says members are ready to start remitting immediately the mandatory provident fund of Sh360 per worker which should be matched by the employer.
FKE said implementing the new law without regulations on pensions has created a loophole for the government to force all employers, including those already running private schemes, to remit both the tier I and tier II deductions to NSSF.
The employers’ body joins trade unions led by Central Organisation of Trade Unions (Cotu) and the Federation of Public Service Trade Unions of Kenya that have threatened to mobilise their members to reject the NSSF contributions.
Employers want to be given until January next year before they can effect pension deductions above the minimum Sh360 per month even as rules governing the new National Social Security Fund (NSSF) scheme are expected to be published Friday.
The Federation of Kenya Employers (FKE) said deferring the additional savings of up to Sh720 per month per worker – known as Tier II contributions – would give them time to prepare for the changes.
“The minister has powers to make these changes and ensure that employers and workers have ample time to organise themselves after delay in publishing contributory pension rules,” said FKE executive director Jacqueline Mugo.
She said FKE members were ready to start remitting immediately the mandatory provident fund of Sh360 per worker which should be matched by the employer.
The revised NSSF Act 2013 raises the monthly deduction to 12 per cent or a maximum of Sh2,160, up from the current flat rate Sh400.
The changes will see top earners remit Sh1,080 while the low cadres will contribute Sh360 or six per cent of the minimum wage set at Sh6,000, with employers matching the figures.
The law requires employers to maintain a mandatory Provident Fund (Tier I contributions) account at the NSSF and a Pension Fund account.
Members of the Provident Fund are also required to maintain pension fund (Tier II contribution) accounts at NSSF unless their employers opt out in favour of a contracted private scheme.
Wednesday, the NSSF gave employers up to July 15 to submit their payroll deductions after the law came into force on June 1.
This means any income earned this month is subject to the new rates.
The FKE said implementing the new law without regulations on pensions has created a loophole for the government to force all employers, including those already running private schemes, to remit both the tier I and tier II deductions to NSSF.
The Retirement Benefits Authority (RBA) is expected to publish the regulations for approving private pension schemes and opting out of NSSF pension contribution by tomorrow, pending stakeholder feedback that could drag for several weeks.
Once the rules take effect, the employers have to give RBA 60 days-notice to opt out of the NSSF pension scheme. “We are not in a position to advise employers to make Tier II contribution not backed by regulations,” said Mrs Mugo.
The employers’ body joins trade unions led by Central Organisation of Trade Unions (Cotu) and the Federation of Public Service Trade Unions of Kenya that have threatened to mobilise their members to reject the NSSF contributions.
A total of 2,265,700 people were in wage employment at the end of last year, according to the Economic Survey 2014.
