Lay-offs dips NSSF collections by Sh3 billion

NSSF CEO Dr Anthony Omerikwa when he appeared before the National Assembly Public Investment Committee on audit queries at Parliament on February 27, 2020. [Boniface Okendo,Standard]

The National Social Security Fund (NSSF) has revealed that members’ contributions have reduced by nearly Sh3 billion since 2018 due to the mass layoff of workers and closure of businesses.

NSSF Managing Director Anthony Omerikwa told the Public Investment Committee (PIC) that the fund had been hard hit by the flagging economy, which had seen corporations, companies and county governments undertake massive restructuring.

Dr Omerikwa warned that collections would dip even further if the economy failed to improve.

“Our contributions have been affected by mass layoffs due to downsizing by employers occasioned by the poor performance of the economy, collapse of businesses and a general financial crisis,” Omerikwa told the committee.

The CEO was responding to a query from the Auditor General that revealed NSSF’s collections in 2018 had declined from Sh31.3 billion recorded in the previous financial year to Sh28.4 billion.

The auditor flagged the decline as an anomaly because the fund had recorded steady growth in the previous years.

A report released in 2018 showed that 1,620 bank employees lost their jobs in the previous year as the financial institutions took steps to contain costs while taking advantage of disruptions caused by capping of interest rates.

The troubles of retail giants like Nakumatt and Uchumi also led to lower NSSF collections.

Omerikwa said that reduced contributions due to late disbursements from the national government to schools and other employers also added to the deficit

The Abdulswamad Nassir-led committee heard that layoffs by county governments contributed to reductions totaling more than Sh1 billion in form of arrears.

“A reduction in the number of county government employees paying NSSF contributions due to lack of confirmation of staff to permanent and pensionable terms affected collections,” said Omerikwa.

The decline in contributions was also attributed to the slump in business and collapse of some sugar millers. “The fund lost revenue amounting to Sh40.6 million from Miwani, Muhoroni, Chemelil, Busia, Mumias and Nzoia sugar factories.”

Omerikwa said the exclusion of the NSSF column in the government payroll also presents a challenge in the receipt of contributions from the national and county governments.

Unremitted contributions

It also emerged that the fund has a deficit of unremitted members’ contributions by employers that has accumulated over the years to about Sh5.6 billion.

Omerikwa complained that recovery efforts were being hampered by numerous court cases.

The revelations come at a time the fund is planning to increase monthly contributions to Sh1,080 from July 1. The move has been necessitated after  Treasury joined out-of-court talks with workers’ unions to resolve a dispute over the retirement deductions.

The stalled NSSF Act 2013 that introduced the changes had also sought to raise monthly contributions from employers to match each employee’s deductions, which have remained at Sh200 monthly.