A statutory deduction is a mandatory deduction that an employer takes out of an employees’ salary. This is mandatory in Kenya, and as an employer you are required to remit the calculated amount to the relevant authority.
According to the new NSSF rates, the earning limits are classified into two: – Upper earning limit (UEL) for employees earning Kes. 18,000 and above and the Lower earnings limit (LEL) for employees earning below Kes. 6,000.
The Employment Act of Kenya, Section 19(1), permits the employer to deduct any amount from an employee’s wages as a contribution to a fund or program that the employee has consented to support and that has been approved by the commissioner for labor. Any voluntary deductions may be opted out of by an employee at any time.
In these series, we focus on the following statutory deductions undertaken in Kenya; NSSF, NHIF, NITA & HELB.
National Social Security Fund (NSSF): –
The National Social Security Fund (NSSF) is a Kenyan government agency responsible for the collection, safekeeping, investing and distribution of retirement funds of employees in both the formal and informal sectors of the Kenyan Economy.
If an employee is already a member of a pension scheme or provident fund and at the same time the National Social Security Fund (NSSF) the maximum allowable contributions should not exceed Kes. 20,000 per month in aggregate.
According to the new NSSF rates, the earning limits are classified into two: – Upper earning limit (UEL) for employees earning Kes. 18,000 and above and the Lower earnings limit (LEL) for employees earning below Kes. 6,000.
Remittance: on or before the 09th day of the following month
Penalty: 5% of the amount due
National Hospital Insurance Fund (NHIF): –
The National Hospital Insurance Fund (NHIF) is a medical cover for employees’ wellbeing. Employers in Kenya are required to make a deduction of the NHIF amount from an employee’s salary depending on their earnings. Unlike NSSF, NHIF does not have a corresponding employer amount.
The current rates in use took effect on April 1, 2025. According to these published rates, the minimum contribution is Kes. 150 for employees earning Kes. 6,000 and below while for employees earning Kes. 100,000 and above, a standard rate of Kes. 1,700 applies. For the individuals in self-employment, the fund expects them to make a monthly contribution of Kes. 500 if they are to benefit from the fund.
Remittance: on or before the 09th day of the following month
Penalty: For defaulters, the law currently imposes a penalty equal to 5 times the amount of contribution that is payable per person for each month or part thereof during which it remains unpaid. However, MPS amended the NHIF act, to remove the penalty for late submission from 5 times the unpaid amount to a 10% penalty on the amount of contribution that remains unpaid. For those in informal employment, the penalty imposed is 50% of the amount due per month.
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