More Pain As Gov’t Introduces Higher NSSF Deductions

Kenyans will experience more pain for higher National Social Security Fund (NSSF) deductions starting February 2024.

NSSF will hive off between Sh420 and Sh1,740 from workers’ pay-slips.

New rates introduced say the lower earnings limit or the amount that is considered the lowest pensionable salary has been raised to Sh7,000 up from the current Sh6,000.

This category of employees will now contribute Sh420 from the current Sh360.

The Upper Earnings Limit has now been hiked to Sh29,000 from the current Sh18,000, meaning that most workers’ will contribute Sh1,740 up from Sh1,080.

Each contribution will be matched by the employer, as has been the case.

The rates will remain in place until the next review in January 2025.

The new deduction plan, that began last year, will gradually increase rates over a five-year period.

This shift began in 2013 when the NSSF Act came into effect, requiring six percent of workers’ salaries be deducted each month.

It was expected that the new contribution rates would take effect in 2014, but that was stalled in a nearly decade-long court battle that challenged the new deductions.

The Court of Appeal however gave the green light for the new deductions in a judgment delivered in September 2022.

This then paved way for NSSF to start the new deduction scheme last year. Its first order of business was setting the Lower Earnings Limit at Sh6,000 and the Upper Earning Limit a Sh18,000.

A table from the NSSF Act 2013 illustrating the progression of NSSF deductions for subsequent years indicates that lower earnings limit for 2025 will likely increase to Sh8,000, with the upper earnings limit set to go up to twice the national average earnings in order improve saving for Kenyans.

For the lower earnings limit, from the fifth year the Labour Cabinet Secretary would gazette the new rates based on what the minimum monthly wage will be at the time.

There have been questions, however, as to how the current minimum wage comes into play.

This is because the lower earnings limit of Sh6,000, that was set last year, was based on the minimum wage back in 2013.

With minimum wage having increased since then, it remains to be seen if this will be factored in as NSSF and the Ministry of Labour determine the rates moving forward.

This adds more pain on Kenyans who are already facing financial difficulties because of many taxes.