Federation of Kenya Employers said a ten-fold increase to Sh2,068 in workers’ monthly contributions to the National Social Security Fund (NSSF) has a serious implication for employment in the country insisting on the need to engage the employees and employers before it is implemented.
This follows the Court of Appeal’s approving the NSSF Act of 2013, saying that it was subjected to public participation as required by the constitution — which demands community input before major decisions are taken.
The top earners would pay half the charge at Sh2, 068, up from the current Sh200, while the low earners were to part with Sh360 or 12 percent of the minimum wage.
This means that for someone earning a constant basic salary of Sh50,000, there will be a deduction of Sh3,000 for NSSF by the fifth year of rolling out this new contribution plan. Employers will pay a similar amount.
The federation says the deduction is huge if implemented to an employee’s total earnings.
“The Act does not clearly stipulate whether the contributions will be deducted as a percentage of total earnings. Raising the pension contributions will be very expensive to both employers and employees and it will impact their take-home pay,” FKE said.
It insisted there is no clear roadmap for the operationalization of the Act.
Therefore, the country needs to be prepared for the transition and a clear implementation framework put in place.
FKE proposed that it is critical workers and employers are engaged before the Act is implemented to provide them ample time to adjust their budgets owing to the hard-economic situation.
“Otherwise, the proposed scheme runs the risk of destabilizing the very beneficiaries it intended to assist and jeopardizing private pension schemes. The issue around the implementation of the Act needs to be addressed due to serious implications it has for employment in the country.”