As from next month, Kenyan employees are going to carry the heavy burden of increased NSSF pension deductions after the Court of Appeal allowed the government to implement a new law.
In 2013, Parliament amended the law establishing the NSSF through the National Social Security Fund Act No. 45 of 2013.
On 24th December 2013 however, the National Social Security Fund Act, 2013 was passed and the commencement date was scheduled for 10th January 2014.
The law states that formally employed Kenyans will make monthly contributions of 6% of their gross salary, a figure that the employer will have to match.
This was suspended after a number of trade unions moved to court seeking to reject the implementation of the law citing a number of issues including public participation, breach of constitutional rights, and flawed legislation process.
The Employment and Labour court agreed with their submissions and declared that the NSSF Act 2013 was unconstitutional since it was enacted by the National Assembly without public participation and involvement of the Senate.
But the NSSF Board of Trustees through Senior Counsel Fred Ngatia appealed the decision, arguing that the court lacked jurisdiction to determine the dispute and wrongly found that the National Assembly failed to involve the Senate when the law did not concern county governments.
In a recent ruling, the court of appeal 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 Sh200 to Sh2,000, is legal and nothing stops the government from implementing it.
“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.
Following this ruling, Kenyans employees will have to dig deeper into their pockets. President William Ruto described this as some of the difficult decisions that must be made.
The president announced that a decision had been reached and salaried Kenyans will have to contribute more towards their retirement plan under the national social security fund.
“We cannot continue to borrow from the savings of others. We need to build our country with our savings. Let us borrow from our savings so that we can give interest to our lenders,” Ruto said.
However, Experts and sector players are concerned that an increase in the social protection contributions like NHIF and NSSF could compel employers to either consider layoffs or have separate arrangements to have consumers pay for the additional operating costs, which could in turn raise the cost of goods and services.
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