How To Calculate Your New NSSF Rates

NSSF rates calculation

Kenya’s National Social Security Fund (NSSF) serves as a cornerstone in the country’s social security framework, providing essential financial support for workers during retirement.

In recent years, significant reforms have been implemented to ensure that the NSSF remains robust and sustainable, adapting to the evolving economic landscape and the needs of the workforce.

One of the most notable changes took effect in February 2023 and continues into 2024, introducing a new tiered contribution system aimed at enhancing the retirement benefits of Kenyan workers.

The revised NSSF contribution rates reflect a strategic shift from a flat-rate system to a more progressive model, designed to better align contributions with earnings.

Under the new system, contributions are divided into two tiers: Tier I and Tier II. This tiered approach is intended to ensure that both low and high-income earners contribute proportionately to their pension savings.

Understanding the Contribution Structure

Tier I Contributions:

Tier I covers earnings up to the Lower Earnings Limit (LEL) of KSh 7,000. Both employees and employers are required to contribute 6% of the employee’s gross salary, resulting in a total monthly contribution of 12% for this tier.

For salaries at or below KSh 7,000, the fixed contribution is KSh 420 from both the employee and the employer, summing up to KSh 840 monthly.

Tier II Contributions:

Tier II applies to earnings between the LEL of KSh 7,000 and the Upper Earnings Limit (UEL) of KSh 36,000. Similar to Tier I, both employees and employers contribute 6% each.

For example, if an employee earns KSh 30,000, the Tier II contribution would be calculated on the portion of the salary exceeding KSh 7,000, which is KSh 23,000. Therefore, the contribution for Tier II would be KSh 1,380 each from the employee and the employer, totaling KSh 2,760 per month.

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Comprehensive Impact

The introduction of these new NSSF rates has significant implications for both employees and employers. For employees, the increased contributions promise better retirement benefits, ensuring a more secure financial future.

For employers, while the higher contributions may initially seem burdensome, they play a crucial role in fostering a more stable and motivated workforce by contributing to the long-term welfare of their employees.

Historical Context and Motivation for Change

The overhaul of the NSSF contribution structure was motivated by the need to modernize Kenya’s social security system.

The previous flat-rate contribution model, which had been in place since the enactment of the National Social Security Fund Act, Cap 258 of 1965, was increasingly seen as inadequate in addressing the diverse financial realities of the modern workforce.

By introducing a tiered system, the NSSF aims to create a more equitable and sustainable mechanism for pension savings, reflecting the economic diversity of Kenyan society.

Practical Implementation

Employers are required to align their payroll systems with the new NSSF rates, ensuring accurate deductions and timely remittances to the NSSF.

The phased implementation of these changes includes rigorous monitoring and support to help organizations transition smoothly.

Furthermore, educational initiatives are in place to inform both employers and employees about the benefits and requirements of the new contribution framework.

To calculate the National Social Security Fund (NSSF) rates in Kenya for this year, follow these steps based on the new guidelines:

NSSF Rates Calculator:

  1. Identify Earnings Limits:
  • Lower Earnings Limit (LEL): KSh 7,000
  • Upper Earnings Limit (UEL): KSh 36,000
  1. Calculate Tier 1 Contributions:
  • For earnings up to KSh 7,000, both the employee and employer each contribute a fixed amount of KSh 420. This totals KSh 840 per month.
  1. Calculate Tier 2 Contributions:
  • For earnings above KSh 7,000, contributions are 6% of the amount exceeding KSh 7,000, up to KSh 36,000.
  • For example, if the salary is KSh 30,000:
    • Calculate the excess: KSh 30,000 – KSh 7,000 = KSh 23,000.
    • Employee’s contribution: 6% of KSh 23,000 = KSh 1,380.
    • Employer matches this amount: 6% of KSh 23,000 = KSh 1,380.
    • Total Tier 2 contribution: KSh 1,380 (employee) + KSh 1,380 (employer) = KSh 2,760.
  1. Summarize Total Contributions:
  • Combine Tier 1 and Tier 2 contributions for both employee and employer.
  • Continuing with the example of a KSh 30,000 salary:
    • Total contribution = KSh 840 (Tier 1) + KSh 2,760 (Tier 2) = KSh 3,600 (total monthly contribution).
  1. Maximum Contribution:
  • The maximum total monthly contribution is capped at KSh 4,320, which includes the maximum Tier 2 contributions for salaries above KSh 36,000.
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For accurate and convenient calculations, the NSSF provides an online calculator where you can input your monthly salary to get the exact contributions required.

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