Understanding the 2023 NSSF Reforms: Essential Information for Employers


A rising number of African countries have lately initiated reforms of their pension and social protection systems. The main motives for such reforms in these countries have been to address the growing fiscal burden of pension liabilities as well as developing a pool of funds for prudent investments.

One of the pension and social protection systems in Kenya is the National Social Security Fund (NSSF) which was formed through an Act of Parliament No. 45 of 2013 to provide for contributions to and the payment of benefits out of the Fund and for matters connected therewith and incidental thereto. It is a mandatory contribution for all employees in the formal sector in Kenya.

Key Objectives of NSSF Act in Kenya

The key objectives of NSSF Act in Kenya are:

  • Provide basic social security for its members and their dependents for various contingencies
  • Increase membership coverage of the social security scheme
  • Improve adequacy of benefits paid out of the scheme
  • Provide a full opt-out at Tier II level of contributions for employers who have or are contributing to registered pension schemes
  • Bring within the ambit of this Act self-employed persons to access social security for themselves and their dependents
  • Operate and manage a scheme that is value-adding to its members
  • Ensuring that the liabilities of the Old Provident Fund are settled within five years from the commencement of the new Provident Fund and the close of the Old Provident Fund
  • Do any other thing or take any measure permitted by this Act for purposes of attaining any or all these objects and for purposes of effective enforcement and application of this Act

Legal Journey

As much as the Act has been clear on its objectives, there has been a legal battle since 2014 whether the NSSF Act of 2013 was constitutional. As a result, there was a ruling by Employment and Labour Relation Court on 19th September, 2022 where three judges Matthew Nduma Nderi, Hellen Wasilwa and Monica Mbaru declared the NSSF Act of 2013 unconstitutional, citing a lack of public participation and non-concurrence by the Senate during the legislative process.

This decision led to an appeal in the Court of Appeal where a ruling on the matter was made early February, 2023. The Court of Appeal declared the NSSF Act No 45 of 2013 legal and constitutional thus ending the legal battle that raged on since 2014. This paved the way for the implementation of the Act as well as effecting the new monthly deductions that President Ruto has been pushing for, citing that the increase will help create a pool of funds that the government can borrow to finance developments at a lower interest rate as compared to very expensive foreign debts.

Through this, some employees that made contributions of Ksh. 200 every month to NSSF will see this amount rise tenfold as well as their respective employers in a bid to match these monthly contributions. Notably, the employee contribution will be directly deducted from the salary and wages, while the employer’s contribution will come directly from their business revenues.

The Impact of New NSSF Rates

The proposals of the new NSSF Act proposes that a total of 12% of the pensionable income shall be remitted to NSSF by the employers and employees. The Act stipulates that the Upper Earning Limit shall be Ksh. 18,000 while the Lower Earning Limit will be Ksh. 6,000. The contribution to a maximum of Ksh. 720 relating to the Lower Earning Limit will be credited to the Tier I account while the contribution of up to a maximum of Ksh. 1,440 relating to earnings between the Lower Earning Limit and Upper Earning Limit will be credited to the Tier II account. 

Putting this into perspective, individuals who earn Ksh.15,000 a month, will be required to contribute Ksh.900 (Ksh. 360 credited to Tier I account and Ksh. 540 credited to Tier II account); for those whose earning is Ksh.18,000 a month or more, the deduction is Ksh.1,080 (Ksh.360 credited to Tier I account and Ksh. 720 credited to Tier II account), which their employers will match. Those earning at least Ksh.50,000 per month ought to have about Ksh.3,000 taken out of their paychecks but the pensionable income is capped at Ksh 18,000 thus the amount contributed by the individual to a maximum of Kshs. 1,080 as illustrated below.

New NSSF rates (2023)
New NSSF rates 2023

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Comments (5)

  1. Nancy Okollah
    June 30, 2023

    thank you for a very simplified explanation of all this

  2. Erick Kidiga
    July 10, 2023

    nice review

  3. Bonface
    October 5, 2023

    What’s the function of tier I account and tier II account.

  4. Damaris
    October 5, 2023

    Clearly understood

  5. Mercy Chebet
    October 20, 2023

    Thanks. This was very useful information

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