Workers’ uptake of pensions shrank by two-thirds last year as the economy created fewer jobs and companies turned to hiring casual workers.
New pension contributors slowed to 245,581 last year compared to 724,212 in 2023, according to data from the Retirement Benefits Authority (RBA)—the pension industry regulator.
It is a mandatory requirement for employers to register new permanent employees with a pension scheme, first with the statutory National Social Security Fund (NSSF), before onboarding them to any other optional schemes. The few workers taking a pension reflect conditions in the job market, where new jobs created last year were the lowest since the Covid-19 economic hardships.
“Among the reasons for the drop is that there were fewer formal new employment in 2024 compared to 2023,” the RBA told the Business Daily.
The NSSF received 556,805 new entrants in 2023 before dropping to 200,183 in 2024, with the decline coming at a time when the country’s collection from payroll taxes has stalled, entrenching concerns of Kenya’s job market.
The bulk of Kenya’s jobs are in the informal market, which is short-term in nature, with employers not mandated to enrol employees on pension schemes. New hires dropped to about 782,300 from 848,100 in 2023, the lowest since the 2020 Covid-19 pandemic, with the economy creating 75,000 formal jobs compared to 122,900 the year before.
About 90 percent of jobs created were from the largely unregulated informal sector, underlining the difficulties of corporate Kenya in creating quality jobs for thousands of graduates leaving universities and colleges annually.
Firms have also been turning to contract staff in a bid to control costs. The number of individuals engaged in casual work was 559,200 in 2024, accounting for 17.4 percent of the 3.31 million formal sector workers. In 2020, casual workers constituted 15.2 percent of formal office and factory jobs.
Casual workers allow companies to fill production needs, often under low wages and without pension and health insurance. Following the implementation of the NSSF Act in 2023, mandatory pension contributions were increased from a flat rate of Sh200, which had been in place for decades, to a new graduated scheme that is pegged on employee salary level. Employers are required to match employee contributions.
Last year, the maximum mandatory pension contribution was Sh2,160 based on an upper earning limit of Sh18,000. This year, the maximum contribution rose further to Sh4,320, pushing employers to make more contributions to their employees’ retirement.
Pension coverage in the country, which looks at the industry membership as a ratio to the working age population, grew last year to 26.5 percent from 25.6 percent in 2023 on the revision of population numbers.
The RBA previously had used the working age population as those between 15-64 years before reviewing it last year to 18-60 years. This change reduced the working population from 29.8 million to 28.3 million, resulting in an improved coverage ratio.
The number of active members in the pension industry also declined to 3.7 million from 4.4 million, which was attributed to the deregistration of some schemes.
The RBA did not disclose the number of schemes deregistered but noted there were voluntary liquidations and transfers, especially by schemes whose contribution rates were lower than those under NSSF.
Volume of unremitted contribution increased by 12 percent driven largely by short-term delays—of less than 30 days—signalling liquidity problems encountered by some of the employers. The volume of unremitted contributions rose to Sh69.4 billion from Sh61.7 billion, the bulk of which was older than 30 days at Sh55.4 billion.
“Unremitted contributions continued to rise in 2024, driven largely by a sharp increase in amounts due within 30 days, which more than doubled,” said RBA. “While contributions overdue by more than 30 days remained relatively stable, the large number of unremitted amounts highlights ongoing challenges in timely remittance, especially for public sector schemes.”
