Scribd
Upload
44 views3 pages

Tax Alert Updated Kenya NSSF Contributions Effective Feb. 2023

Uploaded by

fergerson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
44 views3 pages

Tax Alert Updated Kenya NSSF Contributions Effective Feb. 2023

Uploaded by

fergerson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

TAX ALERT: UPDATED KENYA NSSF CONTRIBUTIONS EFFECTIVE FEB.

2023

There have been legal impediments since the National Social Security Fund (NSSF) Act No. 45 of 2013 (“the Act”) was enacted in Dec. 2013, giving
rise to new NSSF rates.

In Feb. 2023, the Court of Appeal found that The Employment and Labour Relations Court (ELRC) erred in pronouncing the Act illegal. It determined
that ELRC had no authority to do so, as that was a preserve of the High Court. Consequently, the Act is now legal, allowing the government to
enforce it.

The updated NSSF rates will take effect from the payroll month of February 2023.

There will be a lower earnings limit (LEL) for employees who make less than KES. 6,000, with an upper earnings limit (UEL) for employees who
earn KES. 18,000 or above.

The monthly matching contributions by both employees and employers will rise from the current KES. 400 to 12% of a worker's monthly pensionable
income (6% from the employee and 6% from the employer - both contributing an equal amount), with a maximum contribution of KES. 2,160 for
workers earning more than KES. 18,000 per month. Employee contributions will still be drawn directly from their salaries and wages while employer
contributions will still come directly from the employer.

Contributions relating to the earnings below the LEL of the earnings (a maximum of KES. 720) will be credited to what will be known as a Tier I
account while the balance of the contribution for earnings between the LEL and the UEL (up to a maximum of KES 1,440) will be credited to what
will be known as a Tier II account.

Sample computations are indicated in the following table:

Page 1 of 3
Sample Employee Pensionable Tier I Tier I Tier I Tier I Tier II Tier II Tier II Tier II Total
Scenarios Earnings Earnings Pensionable Employee Employer Total Pensionable Employee Employer Total NSSF
(in KES.) Earnings Deduction Deduction Contribution Earnings Deduction Deduction Contribn. Contribn.

1 3,000 3,000 3,000 180 180 360 - - - - 360


2 4,500 4,500 4,500 270 270 540 - - - - 540
3 6,000 6,000 6,000 360 360 720 - - - - 720
4 10,000 10,000 6,000 360 360 720 4,000 240 240 480 1,200
5 14,000 14,000 6,000 360 360 720 8,000 480 480 960 1,680
6 18,000 18,000 6,000 360 360 720 12,000 720 720 1,440 2,160
7 20,000 18,000 6,000 360 360 720 12,000 720 720 1,440 2,160
8 100,000 18,000 6,000 360 360 720 12,000 720 720 1,440 2,160
9 500,000 18,000 6,000 360 360 720 12,000 720 720 1,440 2,160

Further, the Act's Third Schedule also contains the following provisions, indicating a planned progression of contribution rates:

1. The Lower Earnings Limit and the Upper Earnings Limit shall, for the first four years after the commencement date, be in accordance with
the Table below.
2. After the fourth year and thereafter:
a) the Lower Earnings Limit shall be, for each financial year, the amount gazetted by the Cabinet Secretary from time to time as the average
statutory minimum monthly basic wage for the top urban centres, second tier urban centres and rural areas for the year; and
b) the Upper Earnings Limit shall, for each financial year, be the level of earnings equal to four times National Average Earnings.

Year Lower Earnings Limit Upper Earnings Limit


1 6,000 50% of National Average Earnings
2 7,000 1x National Average Earnings
3 8,000 2x National Average Earnings
4 9,000 3x National Average Earnings
Year 5 onwards Lower earnings limit as 4x National Average Earnings
provided in Regulation 2(a) of
the Schedule

Page 2 of 3
IMPLICATIONS

1. Payroll and accounting systems/ records will need to be updated for the Feb. 2023 payroll onwards, to appropriately calculate the new
contributions.

2. Employers need to budget appropriately for the increased employer NSSF contribution amounts.

3. Employees need to take note of their new pay slip computations as the additional monthly employee payments will lower an employee's
net pay after all deductions. However, the increased contributions to the NSSF Fund should be a welcome option for employees who are
not part of a private pension scheme, as this will help them save more for their retirement. Employees should also note that there will be
a slight drop in PAYE tax, as NSSF employee contributions are allowable deductions before arriving at one’s taxable pay.

Sample our free UPDATED monthly PAYE calculator on the following link;

https://www.pna.co.ke/resources/paye-tax-calculator/

For further information or assistance, please get in touch with us through any of the contacts below:

Peter Anchinga Sam Gachuki Robert Ndegwa


Anchinga & Associates Anchinga & Associates Anchinga & Associates
Office Lines: +254 700 16 16 99, +254 780 16 16 99 Office Lines: +254 700 16 16 99, +254 780 16 16 99 Office Lines: +254 700 16 16 99, +254 780 16 16 99
Ext: 102 Ext: 103 Ext: 116
Email: [email protected] or [email protected] Email: [email protected] or [email protected] Email: [email protected] or [email protected]
Web: www.pna.co.ke Web: www.pna.co.ke Web: www.pna.co.ke

Page 3 of 3

You might also like