The High Court has stopped the bid to increase monthly contributions to the National Social Security Fund (NSFF) ten-fold up to Sh2,068 after it ruled that the law supporting the increments was unconstitutional.
Justices Mathews Nduma, Hellen Wasilwa and Monica Mbaru quashed the NSSF Act of 2013, saying it was not subjected to public participation in breach of the Constitution— which demands community input before major decisions are taken.
The NSSF Act 2013 sought to raise monthly contributions by employees from the current Sh200 monthly and demanded employers match the payout.
The higher pension contributions were aimed at helping the NSSF build a bigger retirement pot and offer workers monthly stipends after their retirement as opposed to the current one-off payment.
The President has said the current rate is too low to build savings that would offer decent living upon retirement.
But the court decision has brought relief to employers who were expected to raise billions of shillings to match the workers’ contributions, a hit to firms that are yet to recover from the coronavirus-induced slump, which triggered job cuts, hiring freezes and business closures.
The three judges said the frozen NSSF Act was illegal because its promoters failed to get approval from the Senate despite the law affecting county employees and finances of the devolved governments.
“An order is issued prohibiting the government from compelling or requiring mandatory registration, enrolment or listing of any employer or employee whether registered as a member or any retirement benefits scheme or not ….to register, enrol or list and contribute their earnings or any party,” the judges said.
“Since the NSSF Act 2013 was not presented to the Senate for enactment as a money bill, the Act is declared unconstitutional, null and void.”The contributions were last reviewed in 2001 when the rate was increased to Sh200 from Sh160.
Enforcing the NSSF Act 2013 would have raised the prospects of higher pay-slip deductions to cater for social services, with the National Hospital Insurance Fund also angling for a higher rate.