The Court of Appeal has set aside the judgment of the Employment and Labor Relations Court (ELRC) that declared the National Social Security Act, 2013 (NSSF Act) unconstitutional.
Kenya’s social security regime had a fixed rate of contributions at KES 400 of which KES 200 is deducted from the employee’s salary and KES 200 is contributed by the employer. However, in 2013, the legislature sought to increase this limit to 12% of an employee’s monthly earnings (with 6% deducted from the employee’s earnings and 6% paid by the employer). The rate would be applied on a graduated scale. Employees earning KES 18,000 and above would therefore have seen an increase in monthly contributions from KES 400 to KES 2,160.
This increase in rates was immediately challenged at the ELRC. In determining the issue, the ELRC held that the NSSF Act was unconstitutional because the Senate had not reviewed the Act at the legislative stage. Therefore, the new rates were not implemented.
The judgment was then appealed to the Court of Appeal which finally gave its ruling earlier this month. In reversing the position, the Court of Appeal found that the ELRC did not have jurisdiction to hear the matter. This is because it was not an employer-employee dispute but a dispute over the constitutional validity of the NSSF Act. In addition, the holding that the Senate was required to review the bill during the legislative stage was overturned. The Court of Appeal held that input from the Senate was not required because the NSSF Act did not have provisions affecting the “functional areas” of the county governments as detailed in the Constitution of Kenya.
What this means for employers
The NSSF issued two notices post this decision on the 7th and 9th of February 2023. The first advises that it will work closely with all stakeholders to ensure a smooth transition and implementation of the NSSF Act. The second indicates that the new rates apply with immediate effect.
Employers must adopt measures to ensure that they are compliant with the provisions of the NSSF Act. This includes mandatory registration with the NSSF as contributors to the fund and making the relevant adjustments on the contribution amount to be made to the fund. Employers are encouraged to reach out to the NSSF for any queries they may have.
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