NSSF Rates Kenya 2024 saw a significant change, introducing a tiered contribution system.The NSSF Act of 2013 mandates a two-tier contribution system for Kenya’s National Social Security Fund. Both employers and employees must each contribute 6% of an employee’s pensionable earnings to the NSSF. However, these contributions are subject to specific monthly limits. The Act offers some flexibility: organizations can opt out of Tier II contributions if they have a strong alternative pension scheme for their employees. This gives employers some control over fulfilling their employees’ social security needs. Additionally, the Act ensures responsible financial management by setting monthly contribution limits to guarantee adequate funding.
Table breakdown of Tier I and Tier II Nssf Rates
| Tier | Pensionable Pay | 6% |
|---|---|---|
| I | Up to 7,000 | 6 |
| II | 7,001 – 36,000 | 6 |
| Salary | Pensionable Earnings | Tier 1 Earnings | Employee Tier 1 Earnings | Tier 2 Earnings | Employee Tier 2 Earnings | Total Nssf Deductions |
| 5000 | 5000 | 5000 | 300 | 5000 | 300 | 600 |
| 10,000 | 10,000 | 7000 | 420 | 3000 | 180 | 600 |
| 15,000 | 15,000 | 7000 | 420 | 8000 | 480 | 900 |
| 20,000 | 20,000 | 7000 | 420 | 13,000 | 780 | 1,200 |
| 30,000 | 30,000 | 7000 | 420 | 23,000 | 1,380 | 1,800 |
| 50,000 | 50,000 | 7000 | 420 | 29,000 | 1740 | 2,160 |
| 70,000 | 70,000 | 7000 | 420 | 29,000 | 1,740 | 2,160 |
| 100,000 | 100,000 | 7000 | 420 | 29,000 | 1,740 | 2,160 |
Upper and Lower earnings limit
The NSSF Act of 2013 establishes two funds: the Pension Fund and the Provident Fund. This legislation requires both employers and employees to contribute 6% of the employee’s monthly pensionable earnings, subject to prescribed upper and lower earning limits. Currently, the upper earnings limit is KES 18,000, while the lower earnings limit is KES 6,000. The upper earnings limit will gradually increase to four times the National Average Earnings (NAE). Compulsory contributions to NSSF are up to 12% of the lower earnings limit. Contributions exceeding 12% of the lower earnings limit may be directed to NSSF or any other registered retirement scheme, effective from 1 February 2023. NSSF payments are due by the 9th of the month following the month of deduction. Contributions not paid by the due date will incur a penalty of 5% per month or part thereof.
An example of Nssf contribution from Ksh 5000 basic salary; Lower limit
Let’s consider Sylvia Kamau, a casual laborer earning a basic salary of Ksh 5,000. Since her income is below the Ksh 18,000 threshold, she automatically directs Ksh 300 to her NSSF account every month a 6% of her basic salary Ksh 5000.
Calculating Sylvia’s NSSF Contribution
Here’s a breakdown of Sylvia’s NSSF contribution:
- Employee Contribution: She contributes Ksh 300 (flat rate).
- Employer Contribution: Her employer matches her contribution with Ksh 300.
- Total Monthly NSSF Contribution: Sylvia and her employer together contribute Ksh 600 (Ksh 300 each).
The Benefits of Contributing to NSSF
By contributing to NSSF, Sylvia actively builds her retirement nest egg. When she reaches retirement age, she will receive monthly pension payments. Moreover, NSSF provides financial support in various situations:
- Permanent Disability: If Sylvia becomes permanently disabled, she receives a lump sum payment to help manage her finances.
- Death: In the unfortunate event of Sylvia’s death, her dependents receive a payout to help them cope with the financial loss.
Thus, Sylvia not only prepares for retirement but also ensures financial protection against unforeseen events.
An example of Nssf contribution from Ksh 50,000 basic salary; Upper Limit
Let’s take Naomi, a receptionist in Kenya who earns Ksh 50,000 per month. Her pensionable earning, however, is Ksh 36,000. The contribution to NSSF in Kenya is calculated as 6% of her income.
Calculating Naomi’s NSSF Contribution
To understand how much Naomi contributes to NSSF, let’s break it down step by step:
- Lower Limit Contribution: Naomi first contributes 6% of the initial Ksh 7,000.
- 6% of Ksh 7,000 equals Ksh 420.
- Upper Limit Contribution: Next, Naomi contributes 6% of the remaining amount up to her pensionable earning.
- The remaining amount is Ksh 36,000 minus Ksh 7,000, which equals Ksh 29,000.
- 6% of Ksh 29,000 equals Ksh 1,740.
Therefore, Naomi’s total NSSF contribution amounts to:
- Ksh 420 (lower limit) plus Ksh 1,740 (upper limit) equals Ksh 2,160.
- Employer Contribution: In addition, Naomi’s employer matches her contribution, also paying Ksh 2,160.
Summary of NSSF Contribution
- Employee Contribution: Naomi contributes Ksh 2,160.
- Employer Contribution: Her employer also contributes Ksh 2,160.
Applying for Social Security Contribution Exemption in Kenya
If you are a foreign national with social security membership in your home country and expect to stay in Kenya for less than three years, you can apply for an exemption from contributing to the fund. However, you must first have your application approved for the exemption to be granted.