Unremitted Pay As You Earn (PAYE) and pension deductions jumped by a combined Sh6.36 billion between June and September this year, amid continued breaches by State agencies in forwarding cash, which is deducted from staff salaries.
The latest report by Controller of Budget shows that unremitted PAYE jumped by Sh3.85 billion to Sh22.89 billion while arrears for pension rose by Sh2.51 billion to Sh35.53 billion.
Failure to remit casts doubts on the pension payments of thousands of government employees once they exit service while failure to remit PAYE has derailed efforts by the Kenya Revenue Authority (KRA) to grow tax collections. A host of State agencies have fallen on tough times and budget cuts prompting them to breach the legal requirements on remitting deductions made from employee salaries.
“The Government of Kenya (Employer) contribution remitted to the Public Service Superannuation Scheme (PSSS) under section 6 (2) of the PSSS Act, 2012 had an outstanding balance of Sh2.72 billion regarding remittance for September 2024 as of the end of the reporting period,” Margaret Nyakang’o, the CoB says in the latest report.
It also remains to be seen whether the State entities in breach of the legal requirements on remitting PAYE and pension will be fined.
KRA levies a penalty of a quarter of the unremitted amount or Sh10,000, depending on whichever is higher.
The law also requires the employer to pay the contributions and interest accrued to the scheme in full within a specified period and a five per cent penalty on unremitted contributions or Sh25,000.
The RBA has powers to issue a temporary cessation order from deductions from workers until an employer is able to remit staff emoluments
The National Treasury recently raised concerns on the PAYE and pension defaults by State entities, saying it ‘poses a huge challenge to the social security of the pensioners who may retire without pension’.
An analysis of the CoB report shows that unremitted staff loan and sacco deductions also increased by Sh234.64 million and Sh70.5 million respectively between June and September this year, as woes for government employees deepen.
The share of unremitted staff loans and sacco deductions hit Sh2.46 billion and Sh2.59 billion respectively in the three months.
State corporations, government-owned entities and semi-autonomous agencies, however, marginally cut the share of unremitted deductions to the National Social Security Fund (NSSF) by Sh141.23 million to Sh499.6 million the period under review.
Withholding of PAYE, pension, sacco and staff loan deductions contravenes the law and directives from the National Treasury on the settlement of the debts.
For example, The Retirement Benefits Regulations require pension contributions be remitted to a custodian or guaranteed fund within 10 days of every calendar month.
The National Treasury has repeatedly issued circulars requiring State entities to clear pending bills from the previous financial year as the first charge against the budget allocation before entering into new commitments.
Besides the failure to remit the statutory deductions to the relevant State entities, State corporations, government-owned entities and semi-autonomous agencies.
