Employers are required to effect the enhanced contributions to the National Social Security Fund immediately following last week’s court decision reinstating the NSSF Act 2013, ending a seven-year impasse.
A statement from the Fund stated that employers should begin to remit Sh2,160 for top earners every month, which comprises contributions from both the employer and employee.
“The employers who have been complying with the NSSF Act No. 45 of 2013 should continue doing so, while those who are not should comply as advised,” NSSF said Thursday.
According to NSSF, workers on occupational schemes must make the new contributions until they are exempted by the industry regulator, the Retirements Benefits Authority (RBA), after which they can seek refunds.
The NSSF Act, 2013 increased salaried employees’ monthly deductions from Sh200 to Sh600 for the lowest earner and from Sh320 to Sh1,080 for top earners under a graduated scale. The upper limits on contributions are to rise every year.
Workers earning above Sh18,000 are divided into two levels of contributions — tier I and tier II. Tier I contributions are for those in respect of pensionable earnings up to the lower earnings limit of Sh6,000.
Tier II contributions are those in respect of pensionable earnings above the lower earnings limit.
Those in tier I are to contribute up to Sh720 per month, while those in tier II are to add up to Sh1,440, being contributions pegged on earnings above Sh18,000.
Workers already signed up for an occupational scheme have been offered relief since they would pay six percent of the minimum wage or Sh360 in the first year upon receiving approval from RBA. This will increase to Sh540 in the fifth year in a balance meant to cushion company-sponsored schemes from collapse since it is feared that most employers would discontinue occupation schemes and opt for the statutory fund.
In its statement Thursday, NSSF did not clarify whether the new deductions would be effected on basic pay or total emoluments as employers prepare to take a major hit set to increase their wage bill.
Though employees will see their deductions increase, they stand to be the ultimate beneficiaries of better retirement perks at maturity.
In the last week’s Court of Appeal ruling, the three-judge bench comprising justices John Mativo, Mohammed Warsame and Hannah Okwengu threw out the judgement of the Employment and Labour Relations Court on September 19, 2022, which rendered the NSSF Act of 2013 unconstitutional.