New National Social Security Fund (NSSF) contribution rates, under NSSF Act of 2013 are set to take effect this February 2025 marking the third year of their phased implementation. These changes will lead to higher deductions from employees' salaries, reducing their take-home pay as more funds are directed toward pension contributions.
New NSSF Contributions Rates are as follows
Employees will now contribute 6% of their monthly
salary to the NSSF, a figure that will be matched equally by employers bringing
the total contribution to 12%.
Adjusted Contribution Limits;
a. The minimum contribution has increased
from Kshs. 420 to Kshs. 480.
b. Higher-income earners will see their
contributions rise from Kshs. 2,160 to Kshs. 4,320 per month.
Revised Income Bands;
a. The lower income limit for contributions
has been revised from Kshs. 7,000 to Kshs. 8,000.
b. The upper income limit for NSSF
deductions has been adjusted from Kshs. 36,000 to Kshs. 72,000.
Remittance Deadline
The deadline for remitting NSSF contributions will
remain the 9th day of each month.
Implications for
Employees and Employers:
1.
Reduced Take-Home Pay for Employees;
Employees will experience a noticeable reduction in
their disposable income due to increased statutory deductions. Alongside other
deductions such as PAYE, the Housing Levy, and the new Social Health Insurance
Fund (SHIF), net pay will shrink significantly across various income brackets.
This shift underscores the need for employees to re-evaluate their budgeting
and financial planning to accommodate the increased deductions.
On the upside, higher contributions to employees' retirement funds mean a more substantial pension benefit upon retirement. By consistently setting aside more money, employees will not only build a larger savings pool but also maximize the potential for investment growth over time, ultimately securing a better financial future in retirement.
2.
Increased Financial Obligations for Employers;
Employers will also face increased financial
obligations, as they are required to match the 6% contribution from employees.
This translates into higher operational costs, which could particularly affect
small and medium-sized enterprises (SMEs), which may already be struggling with
financial constraints.
Conclusion:
In Conclusion, the act also allows an employer to
contract out Nssf Pension Fund with respect to tier II Contributions. An employer that participates in or opts
to establish or participate in a private pension scheme can opt to pay Tier II
Contributions in respect of all or a particular description of its employees to
the contracted-out scheme
Incase You need
to Contract out Nssf tier II Contributions
talk to us at Ngao Insurance Agency
on tel no 0722686505 or email info@ngaoinsurance.co.ke for more
info
