More deductions as new housing levy comes into effect

If you are in formal employment in Kenya, your April pay slip will reflect a new statutory deduction of 1.5 per cent to the National Housing Development Fund. The funds will go towards financing the government’s affordable housing program under Big Four Agenda. 

In a public notice carried by a section of the media this week, Transport, Infrastructure, Housing and Urban Development ministry in conjunction with Kenya Revenue Authority also require employers to match the employee’s contribution by a similar margin. Total deductions to the Housing Fund Levy should not exceed Sh5, 000.

The joint contributions should hit the taxman’s coffers by May 9, 2019. The deductions come in the wake an amendment to the Employment Act through the Finance Bill, 2018.

“Employers are required to deduct and remit the levy together with other statutory levies from both the employer and employee by the 9th of each succeeding month together with other statutory deductions,” stated the notice.

An individual can also a make a minimum of Sh200 donation to the scheme. 

For individuals earning less than Sh50,000 per month will acquire the affordable homes under a tenant purchase scheme.  On the other hand, those earning over Sh50,000 will qualify for a 7 per cent mortgage repayable within 15 years.

“In case of ineligibility for a home, the contribution may be transferred to a pension scheme, another person under the scheme or as cash to self, spouse or dependent child,” reads the notice.

The regulations were to be affected beginning January 1, 2019. However this ran into headwinds when COTU, the umbrella workers body went to court in December last year to oppose the regulations citing lack of proper discussions between the government and the workers body.

The Employment and Labour Relations Court granted COTU’s prayers by suspending the levy pending more consultations.

In a quick rejoinder on Twitter, Federation of Kenya Employers CEO Jackline Mugo dismissed the new directive, terming them “unlawful.”

“FKE attended Court on 8/4/2019, obtained an extension of Court Orders suspending the implementation of the Housing Levy up to 20/5/2019," she tweeted.

The government intends to construct 100,000 houses per year under the scheme in order to bring down the backlog that currently stands at 200,000 houses annually.