Starting February 1, 2025, you will see an increase in your National Social Security Fund (NSSF) contributions. This marks the third phase of Kenya’s NSSF Act, 2013, which gradually raises contribution rates to enhance retirement savings.
What’s Changing in NSSF Contributions?
The Supreme Court ruling on February 21, 2024, affirmed the legality of the NSSF Act, allowing the government to continue implementing the five-phase increase in contribution rates.
Here’s what you need to know:
- Higher Employee and Employer Contributions: Both parties will contribute 6% of pensionable earnings.
- Increase in the Lower Limit: From Ksh 7,000 to Ksh 8,000.
- Increase in the Upper Limit: From Ksh 36,000 to Ksh 72,000.
- Greater retirement savings but lower net salary for employees.
Updated NSSF Contribution Rates (Effective February 2025)
| Category | Year 2 (Current Rates) | Year 3 (Starting February 2025) |
|---|---|---|
| Lower Limit (Tier I) | Ksh 7,000 | Ksh 8,000 |
| Employee Contribution | Ksh 420 | Ksh 480 |
| Employer Contribution | Ksh 420 | Ksh 480 |
| Total Tier I Contribution | Ksh 840 | Ksh 960 |
| Upper Limit (Tier II) | Ksh 36,000 | Ksh 72,000 |
| Contribution on Upper Limit (6% of pensionable earnings) | Ksh 29,000 | Ksh 64,000 |
| Employee Contribution | Ksh 1,740 | Ksh 3,840 |
| Employer Contribution | Ksh 1,740 | Ksh 3,840 |
| Total Tier II Contribution | Ksh 3,480 | Ksh 7,680 |
| Total NSSF Contribution (Tier I + Tier II) | Ksh 4,320 | Ksh 8,640 |
How Will These Changes Affect You?
For Employees
- Expect a reduction in your take-home salary due to higher deductions.
- Your retirement savings will increase, giving you better financial security in the long run.
- This increase comes on top of other deductions like SHIF (2.75% of gross salary) and the Affordable Housing Levy (1.5% of gross salary).
For Employers
- Higher payroll costs as your contribution per employee doubles.
- Increased compliance requirements alongside SHIF and PAYE.
- You must update payroll systems before February 2025 to avoid penalties.
What Should You Do Next?
- Check your payslip: See how the new rates will impact your salary.
- Plan your finances: Adjust your budget to account for the increased deductions.
- Employers should update payroll software to ensure compliance.
- Use the latest PAYE Calculator to factor in NSSF and other deductions.
Do you think these changes will impact your financial planning? Share your thoughts and let’s discuss ways to adapt.