Hundreds of thousands of government workers got a salary shock on Wednesday after new pension deductions were effected on their July pay, including the over 350,000 teachers.
Those affected told The Standard the government had slashed up to six per cent of their take-home salary. They however could not verify exact deductions since official payslips were yet to be issued.
The workers who spoke to The Standard, said the move will hit them hard at a time they are already grappling with the high cost of living.
The Union of Kenya Civil Servants (UKCS), which represents tens of thousands of public sector workers said it had called an urgent and “critical” meeting with the government to discuss the “crisis”.
“I am told the government has deducted everyone the new NSSF rates,” UKCS Secretary-General Tom Odege said.
“We have demanded a meeting because it is not clear,” he added. The Standard could not immediately get a comment from government by time of going to press.
The NSSF Act now provides for a monthly contribution equivalent to 12 per cent of one’s monthly salary. Six per cent is deducted from the employee’s salary while the other 6 per cent is paid by the employer. The new NSSF rates apply on a graduated scale.
Under the Act, employees earning above Sh18,000 were to be divided into two levels of contributions called tier I and tier II.
Employees and employers under tier two category (those above the lower limit) are required to contribute each Sh720 monthly to attain Sh1,440 from both parties.
Those under tier one are required to contribute Sh360 month, and their employers match the same. The Ministry of Public Service had earlier this month ordered all government agencies to start deducting the rates.
The implementation of the controversial new rates followed April’s ruling by the Court of Appeal that the NSSF Act of 2013 is legal, giving the State the go-ahead to require NSSF members to make higher contributions.
The Act sought to increase monthly contributions from Sh200 to Sh2,160 but faced hurdles as employees and employers fought it in court.
“Attention is drawn to Circular letter Rd OP/CAB.1/8A dated 13 January 2021 from the Head of Public Service on the implementation of the Public Service Superannuation Scheme (PSSS),” wrote Public Service Principal Secretary Amos Gathecha in a memo dated 18th July this year.
All public servants are subject to Tier I mandatory contributions. “This will require every employee to contribute Sh360 monthly while the employer contributes a similar amount (Sh360) for each employee. The Act requires all employers to deduct and remit monthly contributions to NSSF by the 9th day of every month,” he wrote.
In September last year, the Employment and Labour Court declared the Act illegal and unconstitutional.
President William Ruto’s administration had backed the new rates as part of his push for increased savings. He argued that there is a need to grow savings, pointing out that many Kenyans face poverty in retirement with the Sh200 a month they have been saving with NSSF, being too little to give them dignity in old age.
The Act seeks to increase the monthly pension contribution by as much as 980 per cent for employees earning over Sh18,000.
The contributions under the updated Act—the old piece of legislation being the NSSF Act 1965— would be staggered over five years.
NSSF is supposed to offer workers social protection in their old age. The fund achieves this by collecting contributions from workers and keeping them for workers until they retire.
Currently, those in formal employment contribute Sh200 and the employer matches, adding up to a monthly contribution of Sh400.
And yesterday, dozens of teachers under the Teachers Service Commission (TSC) payroll said their payslips had new deductions.
They said apart from the regular statutory deductions, they had observed a decrease in their salaries, consistent with the proposed deductions by NSSF.
A look at sample teacher’s payslip reveals that some Sh360 has been deducted. This amount was not deducted in the July payslips.
Its implementation however, was challenged by various employers who filed a case in the Employment and Labor Relations Court. The court declared the NSSF Act unconstitutional in September 2014.
NSSF filed an appeal, highlighting that the labour court did not have jurisdiction to determine the constitutional validity of the NSSF Act.
In September 2022, the NSSF law also got another blow after High Court Judges Justices Mathews Nduma, Hellen Wasilwa and Monica Mbaru quashed the NSSF Act of 2013.
They said the law was not subjected to public participation in breach of the Constitution, which demands community input before major decisions are taken.
However, this was overturned in February. The Act got a reprieve after the Court of Appeal declared that the Act was constitutionally enacted. This effectively set ground for the roll out of the new rates.
“The court of appeal declared the National Social Security Fund Act No.45 of 2013 is constitutional vide the ruling of 3rd February 2023. The ruling made NSSF contribution mandatory for all employers and employees in the public service,” the circular reads.
NSSF will also require employers to deduct and remit the monthly contribution to NSSF no later than the 9th day of each month.
Attempts to thwart the implementation of the new rates were frustrated in June after the Supreme Court declined to issue an order stopping the State from effecting the increased contributions.
The court in dismissing an application filed by the County Pensioners Association said they were not entirely satisfied that they met the threshold to warrant the orders sought.