Government and Policy

NSSF Gives New Directives To Employers On Enhanced Rates

BY Jane Muia · February 23, 2023 11:02 am

KEY POINTS

Tier I contributions mean contributions in respect of pensionable earnings up to the lower earnings limit of 6,000 shillings. Tier II contributions on the other hand mean contributions in respect of pensionable earnings above the lower earnings limit and are pegged on earnings above 18,000 shillings.

KEY TAKEAWAYS

The total of the employer’s and employee’s contributions is subject to an upper limit of 2,160 shillings. NSSF raised total contributions for both employees and employers to 2,160 shillings monthly from 200 shillings in a move geared towards building a bigger retirement package for workers.

The National Social Security Fund (NSSF) has released new directives for employers as it commences the implementation of the 2013 Act.

The new directives require all employers to register with the Fund as contributory employer failure to which they will be liable to a fine not exceeding 50,000 shillings. Further, they will be required to provide proof of registration with NSSF for them to enjoy public services.

All employers will also be required to confirm that all employees are registered with NSSF before providing a proper and up-to-date register and record of the employee’s earnings and particulars for such period as may be prescribed by the NSSF Board which shall not exceed 10 years.

Members’ mandatory contributions will be simultaneously remitted at the rate of 6 percent of the employee’s pensionable earnings to NSSF by the 9^th of every month. The total of the employer’s and employee’s contributions is subject to an upper limit of 2,160 shillings. NSSF raised total contributions for both employees and employers to 2,160 shillings monthly from 200 shillings in a move geared towards building a bigger retirement package for workers.

The contributions are divided into two tiers and will see those in Tier I pay 360 shillings while those in Tier II will contribute 720 shillings. Tier I contributions mean contributions in respect of pensionable earnings up to the lower earnings limit of 6,000 shillings. Tier II contributions on the other hand mean contributions in respect of pensionable earnings above the lower earnings limit and are pegged on earnings above 18,000 shillings.

“While Tier I contributions to NSSF are mandatory, Tier II contributions can be paid to an employer’s private pension scheme upon application by the employer and obtaining approval from the Retirement Benefits Authority,’’ says NSSF.

Section 21 of the NSSF Act provides that if an employer participates in or opts to establish or participate in a private pension or social scheme, the employer is obliged to pay Tier I contributions to NSSF and Tier II contributions to the private scheme.

NSSF further says that an employer has a right to decide whether the application for contracting out by reference to a scheme shall apply to all employees or a particular group of employees in the organization. This decision will be made in line with the nature of their employment. The application for the contracting out certificate shall be submitted to the Authority at least 60 days prior to the intended date of contracting out.

The NSSF Act provides that an employer who opts to contract out shall notify all the employees affected and those not affected as well as trustees and administrators of the scheme to which the election is to relate.

The notification, which will also be given to all independent trade unions, shall specify the schemes and the categories of the employees affected. It shall also specify the dates of the intended contracting out.

NSSF prohibits employers from deducting or recovering contributions from the employee’s earnings.