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Understanding the SHIF and Its Impact on Employers

As of 1 October 2024, employers in Kenya are required to transition to the Social Health Insurance Fund (SHIF), following a public notice issued by the Ministry of Health. This change, while delayed due to legal challenges, is now set to take effect, requiring employers to deduct and remit employee contributions to SHIF. Here’s everything you need to know about this transition, its implications for employers, and how to use the SHIF calculator to stay compliant.

Background of the SHIF Transition

Originally, employers were supposed to start deducting and remitting contributions to SHIF on 1 July 2024. However, implementation faced legal obstacles when the High Court declared the Acts governing SHIF unconstitutional. Despite this, the Court of Appeal stayed the High Court’s decision, allowing the legislation to remain in effect until the appeal is resolved. The new deadline for employers to comply is now 1 October 2024.

Key Legislation Involved

The transition to SHIF is based on three critical pieces of legislation:

  1. The Social Health Insurance Act
  2. The Primary Health Care Act
  3. The Digital Health Act

These Acts, which came into force on 22 November 2023, aim to streamline health insurance and healthcare provision in Kenya by operationalizing key funds, including SHIF, the Primary Healthcare Fund, and the Emergency, Chronic, and Critical Illness Fund.

What Employers Need to Do

With the Court of Appeal’s ruling on 20 September 2024, employers must comply with the SHIF requirements. This includes registering their employees with the Social Health Authority (SHA) and remitting monthly contributions to the SHIF.

The responsibility of registration has shifted from employees to their employers, making it essential for companies to ensure all employees are correctly registered with the SHA.

SHIF Contributions: How They Work

Contributions to SHIF are based on a percentage of gross income, and the SHIF calculator will help employers determine the exact contribution amounts.

For Salaried Employees:

  • The monthly contribution rate is 2.75% of the gross salary.
  • The minimum contribution is KES 300 per month, with no maximum limit on contributions.
  • Employers are required to remit these deductions by the ninth day of the subsequent month.

For Non-Salaried Persons:

  • Contributions are calculated at 2.75% of household income, with a minimum of KES 300 per month.
  • Households must make the payment within 14 days before the end of the annual contribution period.

Penalties for Non-Compliance

Employers who fail to comply with the SHIF regulations face serious consequences. These include:

  • A penalty of 2% on the unpaid contributions.
  • A fine of up to KES 2 million or imprisonment for up to three years, or both, for unauthorized deductions or failure to remit contributions.

The Importance of Our SHIF Calculator

To ensure accurate compliance, employers should use the SHIF calculator, which will help them:

  • Determine the correct contribution based on each employee’s gross salary.
  • Ensure that the minimum contribution of KES 300 is met, regardless of salary.
  • Avoid penalties by remitting the correct amounts on time.

The calculator simplifies the process, providing an easy way to calculate and track SHIF contributions for both salaried and non-salaried workers.

Next Steps for Employers

  • Register with the SHA: Ensure that all employees are registered by the SHA deadline.
  • Use our SHIF calculator: This tool will assist in calculating contributions based on salary to ensure accurate and timely payments.
  • Stay informed: The ongoing court case regarding the constitutionality of SHIF legislation is still pending, so it’s important to keep up with any changes that could impact contributions.

The transition to the Social Health Insurance Fund marks a significant change in Kenya’s healthcare system. Despite legal delays, employers must now prepare to comply with the SHIF regulations from 1 October 2024. Utilizing the SHIF calculator will be critical to ensure that all contributions are accurately calculated and remitted, avoiding penalties and ensuring proper coverage for employees.