Employed Kenyans are set to experience reduced take-home pay starting February 2025, as the government enforces the next phase of the National Social Security Fund (NSSF) Act of 2013. Under the new regulations, monthly contributions will double to Ksh4,320, up from the current Ksh2,160, shared equally between employees and employers.
The revised deduction rate, pegged at 6% of an employee’s salary, aims to enhance remittances to the pension fund. The Act also adjusts the pensionable salary limits, raising the lower earnings threshold from Ksh7,000 to Ksh9,000 and the upper limit from Ksh18,000 to Ksh29,000.
Impact on Salaries
With the increased contributions, employees in different salary brackets will see significant reductions in their net pay. For instance:
- A worker earning Ksh40,000 will take home approximately Ksh32,000 after deductions.
- Those earning Ksh50,000 will see their net salary drop to Ksh38,000.
- Employees earning Ksh70,000 will take home about Ksh53,000.
Employers are required to match their employees’ NSSF contributions, effectively doubling the total amount remitted for every worker.
Background and Implementation
The NSSF Act of 2013 faced a decade-long legal battle that delayed its implementation. However, the Court of Appeal cleared the way in 2022, allowing the government to roll out the Act in 2023. The upcoming phase represents the latest step in the government’s plan to increase pension contributions and secure long-term benefits for workers.
Additional Tax Measures
This development comes as the government pursues other revenue-raising strategies through three tax bills currently under review:
- Tax Procedures (Amendment) Bill
- Tax Laws (Amendment) Bill
- Business Laws (Amendment) Bill
These bills, drafted to address the budget deficit after the withdrawal of the Finance Bill 2024, recently concluded public participation hearings under the National Assembly Committee on Finance and National Planning, chaired by Molo MP Kuria Kimani.
As these measures move closer to approval, Kenyans face a financial squeeze amidst rising statutory deductions and proposed tax reforms aimed at boosting government revenue.
