FKE: New NSSF rates will hurt employees, threaten private pension schemes

Employes in Kenya have called for dialogue on the new NSSF rates, warning that the impending higher deductions could destabilise workers and jeopardise existing private pension schemes.

"The increase in pension contributions will be an expensive undertaking to both employers and employees as it has a direct financial impact on payroll costs and on the employees’ take-home pay. We, therefore, propose a phased-out approach," the Federation of Kenya Employers said in a statement to newsrooms on Wednesday evening.

Last week, the Court of Appeal allowed a ten-fold increase to Sh2,068 in workers’ monthly contributions to the National Social Security Fund (NSFF) after it ruled that a lower court did not have powers to hear a case challenging the validity of the new rates.

Justices Hannah Okwengu, Mohamed Warsame and John Mativo have approved the NSSF Act of 2013, saying that it was subjected to public participation as required by the constitution — which demands community input before major decisions are taken.

But on Wednesday, FKE warned that the issue of whether the new NSSF Act 2013 satisfied the constitutional threshold of public participation before being enacted into law had not been adequately addressed.

“This is a fundamental aspect that makes it difficult for employer to support the push to have the law implemented as it is. Social dialogue plays a critical role in the Labour sector and failure to honour it brings disharmony in labour relations in workplaces,” the employers said.

FKE added that before the Act is implemented, meaningful stakeholder engagement sessions should be held so that both workers and employers have ample time to adjust their budgets to accommodate the sharp increases on their retirement savings.

“We need to consider the tough economic situation the country is currently facing when the real challenge facing many Kenyans is how to put bread on the table,” FKE added.