Employers to pay interest penalties on NHIF defaults

Employers and State agencies who fail to remit employees’ standard or matching contributions to the National Hospital Insurance Fund (NHIF) will face an interest penalty equal to the prevailing Central Bank of Kenya lending rate.

The defaulters will also be slapped with a 10 percent penalty on the amount of the contribution that remains unpaid.

The law currently imposes a penalty equal to five times the amount of the contribution that is payable by a person for each month or part thereof during which it remains unpaid.

MPs amended the NHIF Act, to remove the penalty for late submission of contribution from five times the unpaid amount to a 10 percent penalty.

The Act require employers to remit employee contributions on or before the 9th of each month.

MPs made changes to the NHIF Bill compelling companies to match contributions of their staff who pay less than Sh500 monthly.

“If a standard or matching contribution, which a person is liable to remit under section 16, has not been remitted by the day on which the payment of the standard or matching contribution is due, the person shall be liable to pay a penalty equal to the lending rate of interest, of the amount of the contribution, as may be published by the Central Bank of Kenya (CBK) from time to time.”

The MPs, however, put a rider that the penalty shall not be imposed on State agencies if the delay or non-remittance is due to late disbursement from the Treasury or funds appropriated by the National Assembly.

The CBK retained the benchmark lending rate at seven percent at its September 29, 2021 meeting.

The Bill stipulates that employers who remit the money late or beyond the 9th of each month will be liable to a penalty of 25 percent of the outstanding contribution and also foot all medical bills for workers who fall sick within the default period. Individual contributors who fail to pay their premiums by the 9th of every month pay a 50 percent penalty.

“Employer shall be liable to pay the penalty prescribed in subsection (I) and pay the costs incurred by the employee when seeking treatment from a contracted healthcare provider during the period when the contribution is due,” says the government-backed Bill.

“Our staff salaries, for example, are delayed meaning that Parliament delay in remitting statutory deductions to the NHIF. I support this amendment to impose interest penalties at the prevailing CBK rate on delayed remittances,” Sabina Chege, who chairs the Health Committee, said while moving amendments to the Bill.

MPs approved the changes to the NHIF Act 1998 last week and now the Bill awaits presidential signature to become law, setting the stage for firms to contribute billions of shillings to the scheme.

The move to have employers top-up contributions and compulsory membership of all Kenyans above 18 years are two key changes to the NHIF Act 1998, meant to increase collections to the State-controlled insurer.

NHIF received Sh60 billion in the year to June and paid out Sh54.3 billion in claims.