Implementation of the new National Social Security Fund Act will turn the State corporation into a monopoly and kill the pensions industry, an Appeal filed at the Supreme Court states.
The County Pensioners Association says in the appeal pending before the country’s highest court that the employers are likely to transfer employees to NSSF from other schemes in a bid to cut costs.
The association has faulted the Court of Appeal for reviving the 2013 Act after it was quashed by the Employment and Labour Court last year, saying the judges failed to appreciate the effects of the Act.
“The Court of Appeal misapplied Article 41 of the Constitution by failing to appreciate that the practical effect of the impugned Act would be to encourage employers, as rational homo economicus, to cut costs by transferring employees from superior pension schemes to the inferior pension scheme established by the questioned Act,” the association said in the application.
The parties appeared before the Deputy Registrar of the Supreme Court Bernard Kasavuli on Wednesday and were directed to file and serve their submissions within seven days, ahead of the hearing of an application seeking to suspend the decision pending determination of the case.
The case will be mentioned on March 6 to confirm whether the parties have complied with the directives.
The Court of Appeal overturned the decision quashing the 2013 Act saying the matter was handled by the wrong court.
The three-judge bench ruled that the Employment court wrongly assumed jurisdiction in a matter that should have been handled by the High Court as the ELRC can only hear matters where constitutional issues are raised in a context of an employer-employee dispute.
The decision paved the way for the NSSF to demand enhanced contributions in compliance with the Act.
“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,” said the NSSF in a statement on February 9.
Employers are expected to remit Sh2,160 for all earners with a gross income of Sh18,000 and above, half of which is a matchup by the employer for the employee contribution.
But the association through Muthomi Thiankolu says the Court of Appeal failed to see the serious threat of ‘monopoly and emasculation’ that the Act poses to the entire pensions industry.
Dr Thiankolu further said the court failed to appreciate a dispute touching on the constitutionality of a statute that fundamentally alters the pension obligations of every employer or employee in the country in a dispute relating to employment and labour relations.
He further says the court failed to appreciate that the obligation to deduct pension contributions from salaries and remit it to the NSSF or any other pension scheme cannot arise in a vacuum and, specifically, in the absence of an employer-employee relationship.
The NSSF says the new deductions will be effected on gross pay but the impact is expected to be minimal until the third year of implementing the new rates when the size of contributions is set to go higher.
Workers earning above Sh18,000 are divided into two levels of contributions- tier I and tier II with the former being with respect to 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.
