Cash-strapped parastatals have failed to remit employees' monthly deductions to pension schemes.
Unremitted statutory deductions by government agencies jumped by Sh6.09 billion in the financial year ended June 30, jeopardising access to healthcare and a smooth retirement for employees.
Data analysis shows that unremitted pay-as-you-earn (PAYE) tax rose the most, by Sh4.3 billion, to Sh23.39 billion, while unremitted pension deductions increased to Sh34.7 billion from Sh33.02 billion.
Failure to remit the deductions from workers’ pay every month has exposed the employees to the risk of being denied healthcare under the Social Health Insurance Fund (SHIF). Unremitted deductions for SHIF rose to Sh125.62 million, compared to Sh76.45 million at the same time last year.
The withholding of SHIF deductions exposes workers who primarily depend on the State-owned insurer to being locked out of services over non-payment of premiums amid a rise in the cost of basic services and goods, including healthcare.
Unremitted deductions for the National Social Security Fund (NSSF) increased to Sh641.58 million from Sh640.94 million. The piling NSSF and pension deductions that have not been remitted pose a risk to retirees by financially exposing them in their old age.
This is worsened in scenarios where the pension is the only source of income.
“We must now start the culture of remitting all deductions to where they should be remitted. I am calling on the county governments and relevant institutions involved at the national level to verify and clear the debt to safeguard the social security of our pensioners,” National Treasury Cabinet Secretary John Mbadi recently said.
Scores of corporations, State-owned enterprises, and semi-autonomous government agencies have, over the years, been deducting the money but not remitting it to the relevant entities, signalling that it is being diverted to unauthorised spending.
The Treasury is currently struggling to make timely pension payments to retirees, highlighting the impact of the failure by the State entities to remit the pension deductions.
But besides exposing employees, failure to remit the deductions also piles financial pressure on the State entities due to the accumulation of penalties.
Employers are required to remit NSSF and PAYE deductions by the ninth day of the following month. Failure to do so results in penalties of 5 per cent of the tax or contribution due to the relevant agency.
Additionally, employers are charged interest every month at the rate of 1 per cent for unremitted PAYE.
Failure to remit SHIF contributions exposes employers to a penalty of 2 per cent of the deduction.
