NSSF Defends Increase In Salary Deductions By 10 Times

UPDATE: The National Social Security Fund (NSSF) has welcomed the Court of Appeal's ruling consenting to the full implementation of the NSSF Act No. 45 of 2013 which saw monthly deductions from salaries go up from Ksh200 to Ksh2,000.

In a statement released on Tuesday, February 7, NSSF termed the ruling as a significant milestone and a big win for Kenyan workers as this will provide members with the opportunity to enhance their savings, secure their financial future and retire with dignity.

The NSSF Board of Trustees Chairman Antony Munyiri would like to extend the Fund's sincerest gratitude to all stakeholders who have shown unwavering support throughout this process. Mr Munyiri said the trust and confidence shown by stakeholders has been invaluable and the Fund is committed to providing the highest quality services and products to meet member retirement needs.

"He has also assured NSSF members that the Fund is fully committed to working with all stakeholders to ensure a smooth and seamless implementation of the NSSF Act No. 45, 2013," stated NSSF in part.

Munyiri reiterated that the Fund remains focused on providing the highest standard of service and protection for our member's contributions and further believed that the decision will bring the social fund closer to achieving this goal.

Employed Kenyans will now remit Ksh2,000 to the National Social Security Fund (NSSF) from their salaries up from Ksh200 they have been accustomed to paying.

This is after the Court of Appeal allowed the government to implement a new law that sees monthly contributions to the social fund increased by ten times.

Appeal Court judges Hannah Okwengu, Mohamed Warsame and John Mativo ruled that the National Social Security Fund (NSSF) Act of 2013, which sought to increase monthly contributions from Ksh200 to Ksh2,000, is legal.

“We find that the Employment and Labour Relations Court (ELRC) made a mistake in declaring the Act unconstitutional when it had no jurisdiction to question the validity of the law as that was a preserve of the High Court,” ruled the judges.

A woman working in an office. /CLASSIC 105

The ruling now sees NSSF increase contributions to six per cent of employee earnings with the employer matching the same. Beforehand, an employee would contribute Ksh200 just like the employer, meaning an employee would at the end of the month save Ksh400.

The ruling by the Appellate Court also dismissed a High Court ruling that barred NSSF from making mandatory deductions from workers' salaries, deeming the move unconstitutional.

On September 22, 2022, the ELRC court argued that it was in violation of labour rights and insisted that workers should have a right to choose a pension scheme without worrying about contributions to NSSF.

"Sections 20 of the NSSF Act No.45 of 2013 which makes it mandatory to register and contribute to the fund and oblige the petitioner's members (and other employees who have an adequate alternative pension or social security schemes) to join the pension or social security schemes operated by the 1st Respondent violates rights of employees and employers' free choice contrary to Article 49 of the Constitution and is hereby declared null and void," the court verdict read in part.

"An order of injunction is hereby issued prohibiting and restraining the respondents by themselves, their servants, agents, assigns or any person claiming through them or otherwise from demanding, compelling and or requiring mandatory registration, enrolment or listing of any employer or employee whether registered as a member of any retirement benefits scheme or not to register, enrol or list and contribute their earnings or any part thereof in terms of the NSSF Act No.45 of 2013," it added.

Further, the Employment and Labour Relations Court found that sections of the law that gave NSSF a monopoly in the market were illegal. The directive was aiming to grant both workers and employees free will to register for the retirement saving scheme of their choice.

Following the ruling that trimmed its mandate, the social security fund maintained that it was established in line with labour laws and thus vowed to challenge the ruling at the Court of Appeal.

President William Ruto had hinted at reforming the sector to allow workers to increase their contributions, saying that the country's social security scheme was falling behind.

"Today you will not believe that we are among the least pensions scheme on the continent. When you look at Tanzania, they have a better pensions scheme yet we have a better economy and likewise Uganda too," he stated during a meeting with Kenya Kwanza leaders in Naivasha.

"We have to rejig and see the way forward, the people from our professionals will be here tomorrow with those from NSSF to take us through what we have to do."