Susan Njoka had been a waitstaff at a Malindi hotel for one and a half years.
She was employed on June 1, 2015 but resigned on December 2016. She says quit because there was no salary review.
“They had been deducting money from my pay for the National Health Insurance Fund (NHIF) and National Social Security Fund (NSSF) every month. I was shocked when I went for my statement and discovered from the NSSF that they had only remitted the statutory contributions for four months,” said Ms Njoka in an email to our sister paper, The Nairobian, on January 2017.
She said the company owed her 14 months of non-remitted statutory deductions.
“I have tried to follow up the matter with the NSSF in Malindi but nothing has been done. I feel so frustrated. Please help me out as the rest of the staff are suffering,” Njoka said.
When we contacted the hotel, it acknowledged that it had received a demand letter from NSSF.
“…We have received a demand letter dated February 15, 2017 from NSSF on the outstanding amounts and they gave us 14 days to make payments. We intend to honour it and remit any unpaid arrears including that of Susan Njoka by February 28, 2017,” the hotel wrote.
“In respect of NHIF, the contributions are up-to-date and Susan can confirm that at the nearest NHIF office,” Evans Onyango, an accountant at the hotel said.
Ms Njoka is one of many Kenyans who are suffering as companies intentionally fail to remit their workers’ statutory deductions and contributions amounting to billions of shillings to the State’s health and retirement schemes.
A 2017 report by Auditor General Edward Ouko on NSSF contributions reveals Sh754 million in un-remitted members’ contributions outstanding from 20 employers.
“Although management took action by issuing demand letters and also made alternative payment arrangement with employers such as installment payments before considering legal action, it has not established whether any amounts have been realised,” said the audit report.
Even as the companies fail to remit employees’ deductions, another huge amount of money is lying at NSSF’s accounts due to what is blamed on failure by employers to key in right details of their employees while submitting deductions.
“As at June 30, 2018, the transit account had Sh657 million, which belongs to company employees because we have their accounts and once they bring us correct and complete details of individual employee (what we call returns), we push it into their accounts,” said Christoper Khisa, NSSF Public Relations and Communications manager.
He said NSSF pays Sh300 million per month to members as pension. In December 2015, the National Assembly Public Investment Committee (PIC) revealed that more Kenyans could have lost millions in retirement savings because their employers did not pass the deductions to the pension schemes.
For instance, it was found that a state parastatal had not remitted statutory deductions and their third party payments totaling to Sh167 million and Sh12 million.
It also emerged in November 2017 that an estimated 1,500 employees of a university could lose their pension savings after the institution failed to remit their deductions to a scheme.
The Retirement Benefits Authority (RBA) said the university attributed failure to submit the deductions to financial constraints.
Schemes are required to submit to the RBA quarterly returns on status of contributions by the 15th of each month following the end of the quarter.
They are to give disclosures on how much was remitted from employers, period of outstanding contributions and how much was not remitted.
RBA recently published a notice in the local dailies warning employers with registered retirement benefits schemes on non-remittance of contributions.
Notice to pay
The notice came following an amendment to Section 53 of the Retirements Benefits Act Cap 197 through the Finance Act, 2018.
“Section 53B has empowered RBA to require employers to, among other things; pay the non-remitted contributions and accrued interest in full within a specified period; and a five per cent penalty of the unremitted contributions or Sh20,000 whichever is higher; to the authority within seven days of notice,” the notice read in part.
It also warned that chief executive officers of pension firms who delay in remitting audited reports to the regulator three months after the close of the fiscal year face a Sh100,000 fine and a further Sh1,000 for each day of the delay.
“Pay the penalty specified above and submit to the authority for approval a remedial plan providing the period within which the accumulated contributions and interest thereon shall be offset,” the notice read.
NSSF said it is doing all it can to recover the funds through compliance by reaching out to employers who have not yet registered to contribute for their members or remit the funds.
“Employers who are found culpable of defaulting to remit are followed up using the laid down mechanisms through which the fund is able to recover,” Khisa said.
“We also blame human resource managers of different companies who fail to bring us complete details of their employees to help us wire the funds into individual employees account,” said Khisa.
Khisa said employees who realise that their deductions have not been remitted are encouraged to report to NSSF offices.
Contributors can find out the status of their savings through an NSSF App and the fund’s Twitter handle @NSSF_KE, or by visiting its offices.
“We are also soon launching USSD code in conjunction with Safaricom to cater for non-smartphone owners so that one will manage to track his/her NSSF contributions through text messages easily,” Khisa said.
When an employer defaults on NHIF payments, they are penalised. The payment must be forwarded to the health insurance scheme by the 9th day of every month, failure to which a penalty five times the amount is levied.