Introduction
On the 24th day of December 2013, the National Social Security Fund (NSSF) Act No. 45 of 2013 (the “Act”) was assented into law. The Act was set to take effect on the 10th day of January 2014. However, the constitutionality of the Act was challenged in the Employment and Labour Relations Court (ELRC), which held that the Act was unconstitutional.[1]
The decision was appealed, and the Court of Appeal, in a decision dated 3rd day of February 2023, held that the ELRC had no jurisdiction to hear and determine the constitutionality of the NSSF Act.[2] As a result, NSSF issued a notice on the 7th day of February 2023, indicating that it would collaborate with stakeholders to ensure the implementation of the NSSF Act. A further notice dated the 9th day of February 2023 informed employers that the new NSSF rates were effective immediately.
In this alert, we highlight how contributions to the National Social Security Fund (the “Fund”) will impact employees’ pay slips and the increased contributions by employers as a result of the continued implementation of the Act.
The Third Schedule of the Act outlines the progression rates of contributions to the Fund as follows:
| Year | Lower Earning Limit | Upper Earnings Limit | |
| 1 | 6,000 | 50% of National Average Earnings | 18,000 |
| 2 | 7,000 | 1 times National Average Earnings | 36,000 |
| 3 | 8,000 | 2 times National Average Earnings | 72,000 |
| 4 | 9,000 | 3 times National Average Earnings | 108,000 |
| 5 | Lower Earnings Limit as provided in regulation 2(a) of this Schedule | 4 times National Average Earnings | 144,000 |
The implementation of the new NSSF rates started in February 2023. By February 2025, it will be the third year of the new rates, with the increased deductions being enforced in February 2025.
The table below shows the imposed contributions from the first year of implementation to the expected maximum deductions in February 2025:
| Year | Tier I | Tier (Highest possible deduction) | Total |
| 2023 | 360 | 720 | 1080 |
| 2024 | 420 | 1740 | 2160 |
| 2025 | 480 | 3840 | 4320 |
Tier I contributions are charged at a rate of 6% of the lower limit, whereas Tier II contributions are charged at a rate of 6% of the difference between the upper limit and the lower limit, or the difference between one’s salary and the lower limit in the event the salary is below the upper limit.
Once deductions have been made from an employee’s salary, the employer is required to match the employee’s contribution when remitting these contributions to the Fund.
Conclusion
At the start of the third year of the Act’s implementation in February 2025, contributions to the Fund will rise, and both employers and employees will feel the impact. This is because employers will be required to match employees’ contributions based on the new progression rates.
If you have any queries relating to the above, please do not hesitate to contact Stephen Gathaga Mihang’o or Saahil Patel. Please note that this publication is meant for general information only and should not be relied upon without seeking specific subject matter legal advice.
[1] Kenya Tea Growers Association & 97 others v Attorney General & 8 others; Central Organization of Trade Unions (COTU) & another (Interested Parties) (Petition 38, 34, 35, 49 & 50 of 2014 (Consolidated)) [2022] KEELRC 4124 (KLR) (19 September 2022) (Judgment)
[2] National Social Security Fund Board of Trustees v Kenya Tea Growers Association & 14 others (Civil Appeal 656 of 2022) [2023] KECA 80 (KLR) (3 February 2023) (Judgment)
