New NSSF Rates 2023: A Must-Read for Employers and Employees in Kenya
Discover the new NSSF Kenya rates and understand how they impact your income and savings—a comprehensive guide for employers and employees.
In Kenya's ever-evolving financial and employment landscape, staying updated with the latest changes is essential, especially when they directly impact your income or savings. One such pivotal update that Kenyans have recently witnessed is the change in monthly contribution rates of the National Social Security Fund (NSSF). This article delves deep into these new rates, offering valuable insights to employers and employees alike.
Understanding the Role of NSSF
Before we unpack the new NSSF Kenya rates, it's crucial to understand the primary role of NSSF. Established to offer social security protection to formal and informal sector workers, the NSSF is instrumental in registering members, receiving regular contributions, and disbursing benefits to members and dependents.
The Journey to New NSSF Kenya Rates
The change in NSSF payments occurred in February 2023, marking a significant shift in how NSSF contributions are calculated and collected. Before this, the mandatory NSSF deduction was Ksh.200 monthly, shared equally by the employee and employer.
However, the winds of change started blowing in December 2013 when amendments were proposed to the National Social Security Fund Act. The amendments suggested a significant increase in the contribution rate, sparking a court dispute led by the Kenya Plantations & Agricultural Workers' Union. Fast forward to 2023, and the Court of Appeal gave the green light for the new NSSF rates, thus leading to their implementation.
Unpacking the New NSSF Rates
The new NSSF rates are divided into Tier 1 and Tier 2. The employee's salary range determines the categories. The Tier 1 group, earning up to Ksh.6,000, must contribute Ksh.360 monthly. On the other hand, Tier 2 members whose earnings exceed Ksh.6,000 but are below Ksh.18,000 are obligated to contribute Ksh.720 monthly.
It is vital to note that the NSSF monthly rates are split equally between the employer and the employee. This means each party pays 6% of the employee's pensionable salaries and wages. An important point of interest is the annual increase of the upper limit, which matches the national average earnings as per the Kenya National Bureau of Statistics.
Stipulations for Employers and Employees
New rules and responsibilities for employers and employees come with the new NSSF rates. Some of the key points to note include:
- Employers with more than one employee must register with NSSF as contributing employers.
- Employers are obligated to ensure all their workers are registered NSSF members.
- Late payments attract a penalty equal to the monthly contribution.
- Employers and employees are required to maintain updated and accurate records.
- Non-compliance with the new NSSF rates is considered a criminal offense.
NSSF Kenya Interest Rates and Payment Deadlines
Apart from regular contributions, the NSSF pension savings earn an annual interest of approximately 6.87%, providing additional benefits for retirees. This interest stems from the organization's investment income.
Regarding deadlines, contributions are due before the 9th of every month, with late payments being penalized. Therefore, employers must ensure timely contributions.
READ ALSO: How to Register for NSSF Online
The new NSSF Kenya rates signal a substantial change in employers' and employees' financial contributions landscape. With a clear understanding of these rates, you can plan your finances better, ensuring compliance and benefitting from the social security protection provided by the NSSF.
What is the main purpose of the NSSF?
The NSSF provides social security protection to workers in Kenya, ensuring they have a safety net for the future. It collects monthly contributions from members, which it invests to generate a return. These returns are then used to provide various benefits, including retirement pensions, disability benefits, and survivor benefits.
What changes have been made to the NSSF contribution rates?
In 2023, the NSSF contribution rates changed from a flat rate of Ksh.200 monthly to a percentage-based contribution. Employees earning up to Ksh.6,000 (Tier 1) now contribute Ksh.360 monthly, while those earning between Ksh.6,000 and Ksh.18,000 (Tier 2) contribute Ksh.720 monthly. This cost is split equally between the employer and the employee.
How much interest does NSSF earn annually?
NSSF pension savings earn an annual interest of approximately 6.87% from the organization's investment income. This interest is added to the member's savings, increasing their benefit upon retirement or in case of disability.
When are NSSF contributions due?
NSSF contributions are due before the 9th of every month. Late payments attract a penalty equal to the monthly contribution. The employer is responsible for ensuring these payments are made on time.
What happens if an employer or employee fails to comply with the new NSSF rates?
Non-compliance with the new NSSF rates is considered a criminal offense in Kenya. Employers must register with the NSSF and ensure all their employees are registered members. Failure to do so or make timely contributions can result in legal action and penalties.
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