A proposed increase in Kenyan National Social Security Fund (NSSF) contributions has come under fire from City lawyer John Maina Ndegwas, who filed a petition at the Milimani Law Courts seeking to halt its implementation.
Citing potential economic ramifications, Ndegwas argues that the sharp uptick in employee deductions could cripple businesses and trigger widespread job losses.
"The said proposed deduction from the employees are coming at a time when Kenyans are inebriated with the high cost of living with a shrinking pay slip because of a depressed economy," the petition asserts.
The lawyer's primary concern lies in the potential for employers to resort to mass redundancies to offset the increased salary burden.
With inflation and shrinking paychecks already plaguing the nation, Ndegwas warns that the additional financial pressure could be the tipping point for many companies struggling to stay afloat.
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Furthermore, the petition challenges the NSSF Board's adherence to the NSSF Act 2013.
The Act stipulates specific contribution rates applicable for the first four years after its enactment in 2014.
However, Ndegwas argues that the Board has failed to provide clear guidance on implementing these mandated rates, which differ from the proposed 2024 increases.
“The 3rd schedule of the NSSF Act 2013 spells clearly the amount chargeable within the first four years after the commencement of the Act on 10th January 2014 yet the Board has failed to offer guidance to the employers on how to implement this causing confusion and anxiety in both public and private sectors of the economy of Kenya,” reads petition reads in part.
This alleged lack of transparency and adherence to the Act's stipulated timeline has fueled confusion and anxiety within both the public and private sectors.
The proposed adjustments involve raising the lower and upper earnings limits for NSSF contributions.
The lower limit, which defines the minimum acceptable salary for contribution, would increase from Sh6,000 to Sh7,000, impacting employees at the lower end of the wage spectrum.
The upper limit, beyond which contributions reach their maximum, would jump from Sh18,000 to Sh29,000, affecting a broad swathe of the workforce. This translates to a substantial rise in monthly deductions for individuals across various income brackets.
While acknowledging the long-term benefits of a robust social security system, Ndegwas insists on a more measured approach to implementing the contribution increases.
His petition urges the court to grant an injunction and compel the NSSF Board to adhere to the Act's stipulated timeline, advocating for a phased implementation of the planned hikes over a longer period.
This, he argues, would allow businesses and employees time to adjust and mitigate the immediate economic impact.
The court's response to Ndegwas' petition will have significant implications for both the social security system and the overall Kenyan economy.
While ensuring adequate retirement security for future generations remains essential, the court will have to weigh this objective against the immediate challenges facing businesses and their employees.
Finding a balance between long-term financial security and short-term economic stability will be critical in navigating this complex legal and economic landscape.
