Since the Court of Appeal’s decision on 3rd February 2023, which upheld the constitutionality of the NSSF Act, 2013, employers and employees have been making contributions to the National Social Security Fund (NSSF) in line with the Third Schedule of the Act.
What Employers and Employees Need to Know:
1. Current Contribution Structure
- Employee deductions are 6% of their monthly salary, with employers matching this at 6%, bringing the total contribution to 12%.
- The lower earnings limit for contributions in 2024 was Kshs. 7,000, while the upper earnings limit was Kshs. 36,000 (equivalent to the National Average Earnings).
2. Expected Changes for 2025 (Pending Official Notice)
- For 2025, in the third year of implementation, the lower earnings limit is expected to rise to Kshs. 8,000.
- The upper earnings limit is projected to increase to Kshs. 72,000 (equivalent to two times the National Average Earnings, based on 2024 figures).
- The maximum contribution for employees is estimated at Kshs. 4,320, which will be matched by the employer.
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Year 3 Contributions Lower Limit (Tier 1) 8,000 Total Contribution by Employee 480 Total Contribution by Employee 480 Total Tier 1 NSSF Contributions 960 Upper Limit (Tier 2) 72,000 Contribution on Upper Limit (6% of Upper Limit less Lower Limit) 64,000 Total Contribution by Employee 3,840 Total Contribution by Employer 3,840 Total Tier 2 NSSF Contributions 7,680 TOTAL NSSF CONTRIBUTIONS 8,640 (Employee/Employer each to contribute Kshs. 4,320)
3. Tier I and Tier II Contributions
- Tier I contributions are mandatory and must be remitted to NSSF.
- Tier II contributions can be contracted out—meaning an employer can opt to remit these to a private pension scheme instead of NSSF.
- Employers choosing this option must apply to the Retirement Benefits Authority (RBA) for approval of the private scheme to ensure compliance.
4. Remittance Deadline
- The deadline for remitting NSSF contributions remains the 9th of each month, unless the Cabinet Secretary for Labour and Social Protection announces changes.
Important Note: Awaiting Official Notice on 2025 Rates
While these adjustments are anticipated based on the NSSF Act, 2013, they are not yet official. The NSSF has not issued a formal notice confirming the 2025 contribution rates, which are expected to take effect starting February 2025 payroll. For now, the 2024 rates will still apply to January payroll.
Next Steps for Employers and Employees
- Employers should prepare to update their payroll systems once the official notice is issued.
- Employees should anticipate a higher deduction from their salaries, affecting take-home pay in the short term but leading to greater pension benefits in the long run.
- We will provide further updates once the government officially gazettes the new rates.
For any clarifications or assistance in ensuring compliance, feel free to reach out.
Researched and compiled by Isabel Gakuo, Associate. For further advice on any matters raised, please feel free to contact us.
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