Employers are required to adhere to New NSSF Rates

A lot of employers in Kenya have been making inquiries to know if and when the new NSSF rates take effect. This article addresses the questions and gives a background of how that came to be.

Old NSSF Act, 1965 

Remittance of National Social Security Fund (NSSF) contributions in Kenya was for a period of time governed by the National Social Security Fund Act, Cap 258 of the laws of Kenya of 1965. This Act capped the contributions at Kshs 200 to be paid by both the employee and the employer. 

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New NSSF Act, 2013 that birthed the New NSSF Rates

On 24th December 2013 however, the National Social Security Fund Act, 2013 assented and the commencement date was scheduled for 10th January 2014.  

Mandatory Contributions by Employees and Employers 

According to the Act, employers are required to pay to the Pension Fund in respect of each employee in his or her employment- 

(a) the employer's contribution at six per centum of the employee's monthly pensionable earnings;  and  

(b) the employee's contribution at six per cent of the employee's pensionable earnings deducted from the employee's earnings. 

(2) Notwithstanding the provisions of subsection (1), the contributions in the first five years shall be deducted in accordance with the Third Schedule. 

Restrictions on Employers 

According to Section 22 of the NSSF Act, 2013, an employer is entitled to recover from his employee's earnings, the employee's contribution by way of a deduction therefrom for purposes of paying the employee's contribution, but is not permitted to deduct the employer's contribution from the employee's earnings, but shall instead pay from his own resources, and remit to the employee's account under this Act. 

Voluntary Contributions 

The Act also allows for voluntary members to shall contribute to the Provident Fund- (a) a minimum amount of two hundred shillings;  

(b) a minimum aggregate contribution in a year of four thousand eight hundred shillings;

Challenge of the New NSSF Rates in Court 

Before full operation of the Act would take force, Kenya Plantation & Agricultural Workers' Union moved to court vide Kenya Plantation & Agricultural Workers' Union v Board of Trustees,  National Social Security Fund & another [2014] eKLR filed a case in Court challenging certain provisions in the Act and their constitutionality.  

Vide a ruling made by the Industrial Court (Now Employment and Labour Relations Act) on 25th June 2014 in Nakuru, the implementation of key provisions in the new NSSF Act 2013 thereafter stayed. The Court in issuing interim orders against the implementation of the act recognized that no prejudice would be occasioned on the Government because “There is a tripartite understanding that the parties; the employers, employees and the government have between  27.12.2013 when the National Social Security Fund Act was published and the former National  Social Security Fund Act repealed, continued to make contributions to the NSSF as per the former law”. 

The Court also directed that Pending the inter partes hearing or further orders by the court, under the tripartite understanding or arrangements, the parties, as the employers, the employees and  Government will continue to make contributions to the NSSF Board as prevailing before the implementation of the National Social Security Act, 2013. 

On 27th February 2015 Justice Mathews N. Nduma, being the Principal Judge of the Employment and Labour Relations Court made a ruling on a number of consolidated petitions filed by the Kenya County Government Workers’ Union recognizing that the consolidated Petition raises substantial questions of law on the constitutionality of the National Social Security Fund Act, 2013 advised the  Hon. Chief Justice to consider empanelling a bench of an uneven number of Judges, being not less than  three (3) from both the High Court and the Employment and Labour Relations Court but sitting as  Employment and Labour Relations Court to hear and determine the consolidated Petition”  

Out of Court Settlement  

In issuing the interim orders staying the implementation of sections 18, 19, 20 and 71 of the  National Social Security Fund, 2013, the Court vide its ruling of 25th June 2014 encouraged the parties to convene a tripartite meeting convened by the Cabinet Secretary for Labour, Social Security and  Services towards an amicable resolution of the dispute.  

Following the said directions, NSSF, the Central Organization of Trade Unions (COTU), the Federation of Kenyan Employers (FKE) and the Treasury engaged in out of court discussions with the intention of settling the grey areas in the Act. 

Current position  

It is apparent that after the out of court engagements, the parties have agreed to unlock the NSSF  Act of 2013. This is informed by a Public Notice that has been published by NSSF to the effect that employers are advised to make arrangements to submit their contributions in accordance with the new NSSF Act, 2013. The said Public Notice has also provided computation guidelines to employers on how to calculate the contributions set at 12% of the pensionable wages made up of two equal portions of 6% from the employee and 6% from the employer subject to an upper limit of KES  2,160 for employees earning above KES 18,000. 

It is therefore now vital that employers take note of the new published NSSF contributions requirement and ensure full compliance to avoid consequent penalties. 

Update: Current position - Are Employers Required to pay the new NSSF Rates Now?

It is apparent that parties are yet to unlock the NSSF Act of 2013. Employers should however stay alert and watchful for any public notice on the new rates taking effect. I will also keep tabs on it and update this article accordingly.

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Update: In 2023, the court of appeal allowed the government to implement a new law that increased the NSSF contributions. This law takes effect from February 2023. Read more about the changes both to employer and employee in this Workpay Article on the New NSSF Rates 2023.

Written by Alpha Gakunga 

The author is an Advocate of the High Court of Kenya. This brief write-up is for general information only and should not be relied upon without seeking specific legal advice from the author through  gakungaalpha@gmail.com.

National Social Security Fund (NSSF) can be reached through their contacts - 0709 583 000, 0730 882 000