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Economy

Reprieve for workers as house levy frozen

FKE Executive Director Jacqueline Mugo
FKE Executive Director Jacqueline Mugo. FILE PHOTO | NMG 

Workers have been spared a 1.5 percent pay cut for a homes development levy after the Labour Court stopped the deduction that was set to start next month.

Justice Maureen Onyango said the freeze will remain in place pending conclusion of the court case and urged for the suit to be merged with the one by Central Organisation of Trade Unions (Cotu)—which in December successfully got an order stopping the deduction.

The government Tuesday informed employers to effect the home levy on this month’s pay slips, drawing protests from the Federation of Kenya Employers (FKE).

In the latest case, Consumers Federation of Kenya (Cofek) through lawyer Henry Kurauka said the Housing Fund Levy is unfair, oppressive and discriminatory to many citizens who already own houses, retrenched workers, and disabled people, low income earners and those about to retire.

“The housing fund levy does not guarantee that all contributors under the scheme would get houses after investing their money,” he said.

He added that the scheme does not factor the fact some employees in private and public sector enjoy reasonable housing allowances and are members of home ownership schemes as part of the employment terms.

He accused the government of breaching several laws by not subjecting the law to public participation and openness.

Contributors can use their savings as a deposit or security when negotiating for mortgages to buy the affordable houses, while low-income buyers can use the savings to negotiate tenant purchase schemes that eventually leave them as owners.

Under the revised regulations, workers earning less than Sh50,000 will be offered homes under the tenant purchase scheme.

Those on gross pay in excess of Sh50,000 will be offered mortgages at seven percent per annum and expected to repay their loans after 15 years.

At seven percent per annum, the pricing of the mortgages is cheaper than commercial rates that charge double-digit interest rates.

Employees can also get back their money if they are unable to continue with their contributions due to disability, or if they have not been allocated or obtained a house in 15 years.

They will, however, only get their own contributions plus the returns earned, but not the employers’ share of the contribution.

The 1.5 percent levy on salaries is expected to generate about Sh57 billion a year, from about 2.5 million salaried Kenyans, with additional revenue expected to come from voluntary contributors, who will be putting in a minimum of Sh200 into the fund per month.

Justice Onyango yesterday said the case should be handled by Justice Hellen Wasilwa, who is handling the earlier case by Cotu and the case will be mentioned together on May 20.

FKE had earlier joined the Cotu case.

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