Labour Court bars NSSF from raising monthly deductions to KSh 2,000

Employment and Labour Relations Court has barred proposal by the National Social Security Fund (NSFF) to increase monthly contributions ten-fold to Sh2,068.

In a ruling on Tuesday, the court declared the proposal unconstitutional.

The NSSF Act of 2013 was declared invalid by Justices Mathews Nduma, Hellen Wasilwa, and Monica Mbaru who said it did not follow the Constitution’s requirement of public input.

“Since the NSSF Act 2013 was not presented to the Senate for enactment as a money bill, the Act is declared unconstitutional, null, and void,” Justice Nguma said.

He added that companies should not be required to make contributions if their employees are enrolled in other plans.

The NSSF Act of 2013 aimed to increase employee payments from the current Sh200 per month and required employers to match the payment.

The increased pension payments were intended to assist the NSSF create a larger retirement pot and provide employees with monthly stipends rather than the present one-time payment upon retirement.

The court decision impacts President William Ruto’s social security strategy, which calls for raising NSSF monthly contributions.

Employers now have some relief since they were expected to raise billions of shillings to match the workers’ contributions. This has been bad news for businesses that are still struggling to recover from the coronavirus-induced recession that resulted in job losses, hiring freezes, and business closures.

The frozen NSSF Act was declared invalid by the three judges because its proponents failed to obtain Senate approval even though the measure had an impact on county employees and the finances of the devolved governments.

“An order is issued prohibiting the government from compelling or requiring mandatory registration, enrolment or listing of any employer or employee whether registered as a member or any retirement benefits scheme or not to register, enroll or list and contribute their earnings or any party,” the judges said.

The contributions were last reviewed in 2001 when the rate was increased to Sh200 from Sh160.

Enforcing the NSSF Act 2013 would have raised the prospects of higher pay-slip deductions to cater to social services, with the National Hospital Insurance Fund also angling for a higher rate.

The proposed deductions in NSSF Act 2013 would grant NSSF monopoly in the provision of pension and social security services in the country.

“Putting the entire country’s pension and social security services schemes into the care of a single player would encourage employers to close down current schemes which oblige them to contribute more than six percent of an employee’s earnings, contrary to the County Governments Act 2012,” they said.

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