Social security is a human right that responds to the universal need for protection against certain life risks and social needs, the International Labour Organization says.
In simple terms, social security is defined as an income-based progressive contribution that protects workers when they are dropped from the payroll or become incapacitated to work. It also helps their families when the breadwinner dies.
In Kenya, the Act of Parliament Cap 258 established the National Social Security Fund (NSSF) to manage the country’s social security provident and pension funds, which are collected by the Kenya Revenue Authority every month as a Contribution Benefit along with the PAYE (Pay As You Earn).
Pension contributions are allowable deductions that are not subject to instant income taxing, meaning that this security investment is removed to arrive at taxable pay; however, after retirement or when one claims the funds, it is taxed at a reducing rate of not more than 2% as administration costs of the government corporation NSSF.
After the enactment of the National Social Security Fund Act, 2013 [PDF], it became mandatory for persons with income and all employers to join NSSF and make contributions before the 9th of the following month preceding the paid one failure to which an employer risks a fine not exceeding Ksh50,000.
Initially, NSSF contributions were set at a minimum of Ksh200, but following a recent review that took effect on February 15, 2023, all employees must contribute 6% of their salaries towards the retirement plan, and the employer should match the same to bring the total to a 12%. The 6% by the employer is totally from a different source other than the employee’s salary.
Interpretation of New NSSF rates
Here is how the latest NSSF rates work – the amount of money deducted from employees’ payslips, plus employers’ contributions: As per the NSSF Act, the ceiling value that can be considered for the cut was set at Ksh20,000. However, it is capped at Ksh18,000 as the Upper Earning Limit (UEL), the highest amount computed for pension deductions, and eligible for Tier I and Tier II Fund accounts.
On the other hand, the earnings that qualify for deductions in the Tier I category are salaries below Ksh6,000. Tier I NSSF Fund account is mandatory for all employees, but for NSSF Tier II, one can choose to opt-out if they have an already existing organized life insurance or other insurance with other private companies.
This is how to calculate NSSF contributions in Kenya;
The displayed salaries have been used as examples to show the workings. You can substitute it with your earnings when making calculations, knowing that for the NSSF Tier 1 account, the maximum amount to be considered pensionable is Ksh6,000 and below. For Tier 2, the remainder of the NSSF’s Upper Earnings Limit of Ksh18,000 from the Lower Earnings Limit of Ksh6,000 is taken into account when calculating NSSF contributions.
Using the formula;
* Employees of salaries below Ksh6,000: NSSF Contributions = 6% of salary + 6% of employer’s benefaction
* Employees of salaries above Ksh6,001 to Ksh17,999: NSSF Contributions = 6% of Ksh6000 for Tier 1 + similar amount from the employer + 6% of ( Gross salary/pensionable amount – Tier 1 maximum contribution limit Ksh6,000) + similar amount from the employer
* Employees earning Ksh18,000 and above: NSSF Contributions = 6% of Ksh6,000 + matching amount from the employer, for Tier 1 + 6% of (NSSF Upper Earning Limit of Ksh18,000 – Tier 1 maximum contribution limit of Ksh6,000) + matching amount from the employer
Check out how much is deducted from your payslip to pay NSSF from 2023
|Example||Salary||Pensionable salary||NSSF Tier 1 qualified amount||NSSF deduction I from payslip||Employer contribution||Tier 1 account total||NSSF Tier 2 qualified amount||NSSF deduction II from payslip||Employer contribution||Tier 2 account total||Total NSSF Contribution|
To learn more about NSSF contributions in Kenya, you can contact the National Social Security Fund (Headquarters) through;
P.O. Box: 30599 – 00100, Nairobi, Kenya
Main Line: (020) 2729911, 2710552
Toll Free: 0800 2212744
Cell Phone: 0709 583 000, 0730 882 000
Fax: (020) 2727882, 2722013, 2711615