As a Kenyan employer, I know the latest National Social Security Fund (NSSF) contribution rate changes. Every year, NSSF updates its Rates, and 2024 is no different. As of this article’s writing, new NSSF rates were rolled in as of February 2024, affecting employers and employees. So, what are the New NSSF Rates for 2024? How do I calculate these new rates? Well, if you have such questions, no more because, in this guide, I will be taking you through everything you need to know about the NSSF rates.
Let us get started
What is NSSF?
NSSF stands for the National Social Security Fund in Kenya. It is a government body established in 1965 by an Act of Parliament. Today, the NHIF is governed by Act No. 45 of 2013, which allows the organization to provide social security benefits to workers in Kenya. These benefits include retirement benefits, survivor benefits, and invalidity benefits.Â
What are the Key Changes in NSSF Rates for 2024?
In 2024, the NSSF rates direct a 6% increase in contribution rates compared to 2023. If you were paying a minimum KSH 200 contribution rate in 2023, you will now start paying KSH 420 as an employee. In addition, the previous lower earning limit (Tier 1) was capped at Kshs. 6,000, but has now been revised to Kshs. 7,000. The upper earning limit was previously Kshs. 18,000, has been revised to Kshs. 36,000 and above. There are also deductions on pay above Kshs. 36,000 will now be double the previous amount.
To help you understand the NSSF Rates, below is a full table:
Lower Limit (Tier 1) | 7,000.00 |
Total Contribution by Employee | 420.00 |
Total Contribution by Employer | 420.00 |
Total Tier 1 NSSF Contributions | 840.00 |
Upper Limit (Tier 2) | 36,000.00 |
Contribution on Upper Limit (6% of upper Limit less Lower Limit) | 29,000.00 |
Total Contribution by Employee | 1,740.00 |
Total Contribution by Employer | 1,740.00 |
Total Tier 2 NSSF Contributions | 3,480.00 |
Total NSSF Contributions | 4,320.00 |
How To Calculate the Updated NSSF Contributions 2024
Usually, in all Kenyans, those in Payroll both in the Public and Private sectors, the NSSF contributions are automatically subtracted from your salary.
But do you know how these contributions are calculated or how much you should expect to pay? Here is our quick breakdown to help you understand.
The Two Tiers of NSSF
- Tier I – This mandatory tier applies to all formally employed workers. Your employer matches your contribution to Tier I.
- Tier IIÂ is voluntary, meaning you can choose how much additional money (up to 6% of your pensionable earnings) you want to contribute.
What are “Pensionable Earnings”?
This portion of your gross salary is used to calculate your NSSF contributions. There’s a minimum amount (Lower Earnings Limit) and a maximum amount (Upper Earnings Limit). Currently, in 2024, the Lower Earnings Limit is KES 7,000. On the other hand, the Upper Earnings Limit is Kshs. 36,000 and above
So, back to the main question: how do you calculate NSSF contributions?
In 2024, NSSF contributions are calculated at 6% of your pensionable earnings. The amount is payable to count toward your Tier I contributions.
Here’s a quick and easy formula:
- Figure out your pensionable earnings (it might be your entire salary).
- Multiply your pensionable earnings by 0.06 (that’s 6%).
- That final number is your monthly NSSF contribution; your employer will pay the same amount.
EXAMPLEÂ
Let’s say your gross salary is KES 30,000 in 2024. Here’s how your NSSF is calculated:
- Your contribution: KES 30,000 * 0.06 = KES 1,800
- Employer’s contribution: KES 30,000 * 0.06 = KES 1,800
- Total monthly NSSF contribution: KES 3,600
It’s important to note that the NSSF contributions should be remitted by the 9th day of each subsequent month.
Penalties for Non-Compliance with NSSF Rates
The Act No. 45 of 2013 requires all Kenyan employers to register with NSSF as contributing employers. Furthermore, the employers should ensure prompt registration of all employees as members of NSSF and deduct and remit contributions in full by the 9th day of the following month. If not done on time late, NSSF Contributions payments attract a penalty of 5% of the total contributions for each month.
NSSF Benefits Beyond Retirement
NSSF Kenya is not solely focused on deducting employees’ and employers’ wages but offers additional benefits beyond retirement. Some key benefits provided by NSSF include:
- Providing financial support to members in their retirement years once they reach the age of 55 years or when they retire from regular employment.
- Allows members at least 50 years old and unemployed to withdraw funds from their NSSF savings to support them post-retirement.
- There is the Survivors Benefit paid to dependents or relatives of a deceased NSSF member
- members who are permanently incapable of working due to physical or mental disability are entitled to Invalidity Benefit so long as they are over 50 years of age
- Members relocating abroad with no intention of returning to Kenya are entitled to emigration Benefit
Conclusion
Knowing the latest National Social Security Fund (NSSF) contribution rate changes is important for a Kenyan employer. Every year, NSSF updates its Rates, and 2024 is no different. As of this article’s writing, new NSSF rates were rolled in as of February 2024, affecting employers and employees. So, what are the New NSSF Rates for 2024? How do I calculate these new rates? In this guide, I will explain everything you need to know if you have questions about the NSSF rates.