Workers, firms to pay more for NSSF as the court upholds Sh. 2160, up from Sh. 200

 

NSSF office.

The Court of Appeal determined that a lower court lacked authority to consider an appeal against the legality of the higher rates, so it exponentially increased workers' monthly payments to the National Social Security Fund (NSFF) to Sh2,068.

Justices Hannah Okwengu, Mohamed Warsame, and John Mativo gave their approval to the NSSF Act of 2013 on the grounds that it was open to public participation as required by the constitution, which says that people should have a say before important decisions are made.

The higher pension payments are meant to help the NSSF build up its retirement fund and give employees more benefits than the one-time payment they get now when they retire.

Since the trial court didn't have the right to hear the case in the first place, this was enough for the justices to say that the appeal was successful.

The ruling gives President William Ruto more reason to do what he has said he wants to do, which is to raise retired employees' monthly withdrawals. He says this will help them live well after they retire.

Therefore, we revoke the whole of the judgment from September 19, 2022, as well as any related orders. The court ruled that each side was responsible for paying their own appeal fees.

The decision was made only a few months after NSSF challenged a ruling from the Employment Court that had rejected its attempt to raise employees' monthly contributions.

The Kenya Tea Growers Association and the Agricultural Employers Association went to court to stop the planned increase. They said that the law behind the increase was illegal.

In a decision from last year, Justices Mathews Nduma, Hellen Wasilwa, and Monica Mbaru said that the NSSF Act of 2013 was not valid.

They said that the Act did not involve the public because the Constitution says that important decisions should not be made without public input.

The last time the payments were reviewed was in 2001, when the rate was raised from Sh160 to Sh200.

Improve prospectsWith the NSSF Act 2013 now in effect, there is a chance that employees' payslip deductions for pension payments will increase.

The now-defunct Act said that the worker's and employer's combined pension contributions could not be more than Sh4,136, or 12% of the maximum pensionable wages of Sh34,476.

However, the state opted to spread the payment over five years in order to lessen the burden on the employees. As a result, top earners would pay more than Sh15,000 each month, with their employers topping out at an equal amount in the fifth year.

The government set a ceiling on the first year's 12.5% fee at the national average monthly income of Sh34,476, which implies that the NSSF may only be reimbursed up to Sh4,136 per month.

The fee would be split equally among the highest earners, who would pay Sh2,068 instead of the present Sh200, while the lowest earners would pay Sh360, or 12% of the minimum wage.

NSSF says that the reliance ratio in the country is too high and that more savings would help people age with respect.

It was set at Sh6,000 as part of a tiered scale designed to reduce senior citizen poverty.

Workers who have already signed up for an occupational plan have been given a break because they would have to pay 6% of the minimum salary, or Sh360, in the first year after getting permission from the Retirement Benefits Authority, the industry regulator.

Most businesses were expected to stop offering occupation schemes and switch to the statutory fund. To protect company-sponsored plans from failing, this amount was set to rise to Sh540 in the fifth year as a safety net.