KPMG, the UK-based audit firm, has raised concerns about the recent hike in National Social Security Fund (NSSF) contributions, warning that it will reduce the purchasing power of many Kenyans.
The firm explained that, effective this month, employees will see a decrease in their net monthly pay, with the mandatory NSSF deduction rising from Ksh2,160 to Ksh4,320.
Under the NSSF Act of 2013, all workers aged 18 and older, who haven’t yet retired, must contribute 6% of their pensionable earnings. The new regulation, which has been rolled out in phases, is expected to directly impact employed Kenyans' take-home pay.
The NSSF contributions are divided into two tiers. Tier one covers earnings up to Ksh8,000, while tier two applies to salaries exceeding this limit, now set at Ksh72,000. These changes mean that some workers will contribute even more to the fund.
Employers are required to remit these deductions by the 9th of each month. While the NSSF Act was passed in 2013, it has only been enforced recently, following a lengthy court battle.
KPMG also pointed out that the increased NSSF contributions would add to the financial burden on employers. They face higher staffing costs and more compliance requirements, including other statutory deductions like the Affordable Housing Levy and updated PAYE bands.
However, there’s a silver lining. KPMG noted that the higher contributions could boost the national savings rate and individual pension funds in the long run.
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