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State pension fund moves to rope in all employees

By | November 14th 2009

By Morris Aron

It is now mandatory for all employers to contribute retirement savings for their workers to the National Social Security Fund (NSSF).

The new law — that took effect two weeks ago — requires all employers with one or more employees to remit pension to NSSF from November 1, thanks to a gazette notice by Labour Minister John Munyes on October 30.

Alex Kazongo, NSSF Managing Trustee at a media briefing. Photo:Mbugua Kibera /Standard

This means employers, including small enterprises and those who employ domestic and farm workers, must contribute to the State pension fund.

"All employers are now required by law to remit pension to NSSF," said Alex Kazongo, the managing trustee of NSSF.

Criminal offence

"Those that will not comply will be treated as criminal offences and will face the full force of the law under the NSSF Act."

Previously, only employers who had five workers or more were required to contribute retirement savings to NSSF.

The new law also applies to casual workers who have been in employment for more than three months.

By enacting the new law, NSSF has extended the net of employers contributing to the retirement kitty by two million in the formal sector and six million in the

Informal sector.

With the new rules, no employer will be exempted from the provisions of the NSSF Act on the strength of having an in-house occupational pension scheme.

Such an exemption is now subject to the Minister of Labour approval upon recommendation by the board of trustees of NSSF, on account that such an employer operates a universal national scheme that is comparable to NSSF.

Minimum contribution

Currently, NSSF is the only scheme catering for all.

Under the new arrangement, each employer will be required to remit Sh400 — which is the minimum contribution a month — out of which the employer contributes half the amount and recovers the other half from the employee’s salary.

There is also the option of workers topping up their contributions, by paying more than the minimum amount set by the law.

In an advertisement in local dailies yesterday, NSSF said all employers with one or more employees that haven’t registered with NSSF are required to do so within three weeks.

According to NSSF, the new laws are meant to level the playing for all employers and ensure that employees save for their sunset years.

"Millions of Kenyans are living in destitution in retirement even after working for years," said Mr Kazongo.

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