Starting February 1, salaried Kenyans will experience thinner payslips as new contribution rates for the National Social Security Fund (NSSF) come into effect.
The revised rates will see NSSF deductions double, impacting both employees and employers.
New NSSF Rates Contribution Framework
Under the updated framework, NSSF contributions have been increased to 6% of an employee’s salary, with employers required to match the same amount.
This adjustment raises the minimum contribution from Ksh 420 to Ksh 480, while higher-income earners will contribute up to Ksh 4,320, a significant increase from the current Ksh 2,160.
The upper income limit for contributions has also been adjusted, rising from Ksh 36,000 to Ksh 72,000. Similarly, the lower limit will increase from Ksh 7,000 to Ksh 8,000.
Employees earning Ksh 72,000 and above will bear the heaviest burden, with their contributions doubling to Ksh 4,320.
Impact on Different Income Levels
For employees earning Ksh 50,000 monthly, their NSSF deductions will now comprise Ksh 480 for the first tier and Ksh 2,520 for the second tier, bringing total contributions to Ksh 3,000.
This marks an increase from the current deduction of Ksh 2,160. Over the 2026 financial period, these contributions will amount to Ksh 12,000 annually.
Historical Context of NSSF Contributions
NSSF was established in 1965, requiring employees to contribute a fixed Ksh 200, matched by employers.
However, the administration of former President Uhuru Kenyatta revised the law to introduce a progressive contribution system based on salaries.
The revised NSSF Act, enacted in 2013, raised contributions to 6% of earnings to encourage retirement savings. Although scheduled for implementation in 2014, the law faced legal challenges until February 2023.
The second phase of the rollout was implemented last year, and the third phase, set to begin in February 2025, is expected to have a notable impact on salaried workers’ incomes.
Additional Deductions and Financial Strain
The increase in NSSF deductions comes amidst other levies introduced by President William Ruto’s administration.
Salaried Kenyans already contribute 2.75% of their wages to the Social Health Insurance Fund (formerly NHIF) and a 1.5% housing levy. Additionally, the pay-as-you-earn (PAYE) tax rate has risen to 35% for higher income brackets.
Combined with contributions to welfare groups and staff unions, financial analysts estimate that employees earning Ksh 50,000 per month will take home an average of Ksh 39,000, while those earning Ksh 100,000 will net approximately Ksh 72,000.
Government’s Justification and Pushback
President Ruto has defended the increased NSSF contributions, stating that the government aims to raise Ksh 1 trillion by 2027 under the new framework.
In December 2023, the President described the system as “fair, equitable, and progressive.”
However, the revised rates have sparked widespread criticism from both employers and employees.
Employers argue that the increased contributions impose a financial strain, while workers express concerns about shrinking take-home pay.
As the rollout continues, the NSSF rates adjustments are expected to remain a contentious issue, with many calling for a review of the financial impact on salaried workers.
