State now seeks to criminalise non-remission of statutory deductions by employers
National Treasury Cabinet Secretary John Mbadi.
National Treasury Cabinet Secretary John Mbadi has put on notice employers who deduct statutory deductions from their employees but fail to remit to the various schemes saying they will soon be dealt with as criminals.
Mr Mbadi told the National Assembly committee on Finance and National Planning that he has already submitted amendments to the Retirement Benefits Act seeking to criminalise failure by employers to remit statutory deductions of employees to the pension schemes.
The CS told the committee that many employers make deductions to the employees’ salaries for various statutory deductions, but do not remit them to the various agencies as required.
"We have made a legislative proposal to the Senate to criminalize non-remittances of pension benefits. We hope it will be fast-tracked," Mr Mbadi said.
He said it is not right for an employee to retire, only to start waiting in vain for his benefits.
"Pension benefits is non-negotiable because somebody has offered services to this country and ought to enjoy their retirement with dignity," said the CS.
As it is now, it is not expressly illegal not to remit the deductions, but just a moral question for employers.
Mr Mbadi decried to the lawmakers that most pension schemes that owe retirees billions of their pensions, are underfunded and are struggling hence can't pay the pension as required by law.
He proposed to the committee that the only way out is for the institutions that owe their employees billions of shillings as pension to do a supplementary budget so that parliament can specifically allocate money to pay those that are waiting for their pension.
Other purposes
He revealed to the committee that most employers deduct the statutory deduction but only remit a portion with the remaining balance being used for other purposes such as payment of suppliers which he said is illegal.
"It is illegal for employers to use deducted money for other purposes such as paying suppliers," Mr Mbadi said.
"Even in cases where the money is deducted, they are never remitted, especially the county governments," Mr Mbadi has added.
The CS also told the lawmakers that the National Treasury has also written to the Head of Public Service Felix Koskei, seeking integration of the payroll of all public servants so as to ring-fence workers' statutory deductions.
"We need to integrate the payroll so that once money has been deducted from employees, it can't be used for any other purpose. If it's meant for NSSF, it goes there; if it's for pension, it goes there directly," Mr Mbadi said.
According to the Retirement Benefits Act, where there is non-remittance by an employer, the Retirement Benefits Authority (RBA) will direct the employer to pay the contributions and interest accrued to the scheme in full within a specified period as well as a five per cent penalty on unremitted contributions or Sh20, 000 whichever is higher, and paid within seven days of receiving a notice.
The RBA will also issue a temporary cessation order from deductions from employees until the employer is able to remit the employee emoluments. If the employer is unable to remit as required, the RBA will facilitate members to join other schemes where their contributions shall be remitted.
A report tabled in the committee in February this year indicates that local Authorities pensions trust, University of Nairobi and Moi University pension schemes are among the leading institutions with the highest amounts of unremitted pensions of their members.
According to documents before the National Assembly committee on Finance and National planning, as at December 31, 2024, Local authorities pension trust had a total of Sh8.8 billion of unremitted pension, University of Nairobi pension scheme 2007 has failed to remit Sh8.3 billion while the local authorities provident fund is holding Sh6.8 billion of unremitted money.
The document tabled by the RBA indicates that cumulatively, there are 47 various schemes that are holding a combined amount of Sh59, 942,470,146
The committee yesterday questioned where the money deducted from employees is taken if it’s not available for the retirees.
“This money was deducted and is supposed to be paid to the rightful owner upon retirement. So where is it? asked Karachuonyo MP Adipo Okuome.
The committee has now summoned all the Chief Executive Officers of institutions that owe their employees billions of shillings in terms of pension.
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