How the Tenfold Increase in NSSF Rates Affects You - Money Weekly

It is almost mid-February already, the Valentine's mood is kicking in, your January bills should have been cleared by now and yet the world of money keeps moving forward, bringing with it opportunities as well as lessons for your future financial wellbeing.

From NSSF contributions set to increase tenfold starting this month and what that means for your pocket, to mobile money agent transactions hitting a new record, and employment projected to rise this year according to a CBK survey, last week had quite a lot to unpack.

As we do every Thursday, here's our weekly summary of the top money news from the last seven days that could impact your money.

Workers to Pay 10x More to NSSF as New Law is Passed

Beginning this month, Kenyans will start contributing up to Ksh2,160 per month from their salaries to the National Social Security Fund (NSSF), up from the current Ksh200.

Following a Court of Appeal ruling, employers will henceforth be required to deduct 6% of an employee's pay as a mandatory contribution to the fund, and the employer will be required to match that amount making the total monthly contribution 12% of an employee's pay.

In a statement on Thursday, February 9, the NSSF advised all employers to start complying with the NSSF Acto No, 45 of 2013 which sets a minimum limit of Ksh360 for the lowest earning employee and an upper limit of 2,160 for those earning above Ksh18,000. This is according to the first year of the Third Schedule of the Act.

The contributions were last revised in 2001 when the rate was raised from Ksh160 to Ksh200.

The NSSF Act of 2013, which sought to increase monthly contributions from Ksh200 to Ksh2,000, was declared to be lawful by Appeal Court judges Hannah Okwengu, Mohamed Warsame, and John Mativo.

The NSSF Act 2013 had been declared unlawful and unconstitutional by the labour court judges Nduma Nderi, Hellen Wasilwa, and Monica Mbaru in September 2022 preventing the government from implementing it for higher monthly contributions.

The NSSF had 348,291 registered members and a Ksh284.9 billion investment portfolio as of June 2021. Last year, interest earned by NSSF savings increased to 10%, outpacing inflation. This is as compared to 7% in the previous period making this the highest interest paid by the fund in seven years.

The recommended amount in the act includes both the employee's and the employer's total contribution.

Summary of New NSSF Contributions by Salary

Salary Scale                      Total Contribution (Employer + Employee)

Ksh0 - Ksh3,000               -   Ksh360

Ksh3,001 - Ksh4,500        -   Ksh540

Ksh4,501 - Ksh6,000        -   Ksh720

Ksh6,001 - Ksh10,000      -    Ksh1,200

Ksh10,001 - Ksh14,000    -    Ksh1,680

Ksh18,000  and above     -    Ksh2,160
‍

Read Also: All You Need to Know About NSSF Deductions That Will Reduce Your Salary

Mobile Money Agent Transactions in Kenya Hit Ksh7.9 Trillion

Kenyans used mobile money in their daily lives to the tune of Ksh7.9 trillion ($20.3 billion) in transactions handled by mobile money agents in 2022.

The number of active mobile money agents increased to 317,983 last year from 298,272 the year before, according to new data from the Central Bank of Kenya (CBK).

This demonstrates that business owners, especially in rural areas, saw a need to fill a market gap by offering cash deposit and withdrawal services in places where there weren't many or any mobile money agents. More people are using mobile money to pay for things like transport, shopping, and other bills.

This highlights the ongoing movement away from cash and represents a 15% increase over the Ksh6.86 trillion in mobile transactions in 2021.

Due to rising economic spending activities spurred by intensified political campaigning just weeks before the August 2022 elections, a record Ksh722.52 billion in mobile payments was made in July.

The country now has 73.12 million mobile money accounts overall, up from 68.03 million in 2021, suggesting increased demand for mobile money services. Additionally, 5.09 million new mobile money accounts were opened during the year.

Read Also: 10 Reasons to Start Saving Now

Nearly Ksh20 Billion was Paid in Illegal Salaries By 34 Counties.

According to a new analysis, 34 counties breached the law and illegally paid about Ksh20 billion in compensation, increasing the already growing public pay bill and stressing the importance of weeding out ghost workers.

Based on the Auditor General's report on counties' use of funds in 2020/21, the 34 devolved units broke the Public Finance Management (PFM) statute, which limits any public institution's salary spending to 35% of revenues.

The report also cites instances in which counties alleged to have spent millions of shillings on salaries but were unable to produce paperwork, signaling the existence of ghost workers and a tendency among counties to pay salaries manually, which is susceptible to misuse.

Nandi County was the biggest offender, with salaries accounting for 52% of its Ksh6.9 billion in revenues. The county's labor cost was Ksh3.57 billion for the fiscal year, exceeding the pay cap by Ksh1.15 billion.

According to the Auditor-General, throughout the fiscal year, at least 19 counties spent more than 40% of their earnings on salaries, equivalent to around Ksh15 billion paid illegally. 

While Nandi County ranks first in terms of wages paid as a proportion of county earnings, Machakos and Kiambu counties paid the most in regard to actual money spent.

Machakos County illegally spent Ksh1.74 billion on employee remuneration, which was 47% of its Ksh11 billion budget.  Last year, the county's pay bill was Ksh5.6 billion, according to the Auditor General. Kiambu County paid its employees Ksh6.78 billion, which was Ksh1.5 billion over the legally permitted maximum budget spending.

The wage bill accounted for 45% of the county's Ksh15 billion in revenue.

Other counties that spent more than 40% of their earnings on staff were Taita-Taveta, Garissa, Meru, Tharaka-Nithi, Nyeri, Kirinyaga, Elgeyo-Marakwet, Baringo, Laikipia, Bungoma, Kisumu, Kisii, and Nyamira.

According to the report, Isiolo, Wajir, and Vihiga counties also spent more than 40% of their revenues on salaries.

Cumulatively, counties illegally spent Ksh19.6 billion which could have supported development projects. The amount is equivalent to 5.3% of the Ksh370 billion that all counties equitably received from the national government during the fiscal year.

Read Also: How to Waste Loan Money in 8 Simple Steps 

Employment to Increase this Year on Improved Business Activity

According to the central bank of Kenya (CBK), Kenyan companies plan to hire more staff this year as economic activity improves.

Banks will dominate in employment creation, according to the CBK's Market Perception Survey, followed by transportation and services, agriculture, and manufacturing.

According to the report, 95% of respondents in the banking sector expect increased job growth this year, whereas 75%, 67%, and 45% of respondents in transportation and services, agriculture, and manufacturing respectively, expect increased job growth this year.

According to CBK, bank respondents projected planned business growth, expansions, and remodelling to boost employment, as well as a rise in business volumes and predicted national stability.

Kenya's private sector activity has improved for three months in a row, according to the Standard Bank Purchasing Managers' Index.

The PMI increased to 52 in January, backed by increasing demand and higher firm sales, indicating that the economy is still recovering from last year's elections in August.

Read Also: Top 10 Highest Paying Jobs & Careers in 2023

The Govt Intends to Shift All Services Online by July

Beginning in July, government services will be available online to save time, money, and the cost of doing business said ICT Cabinet Secretary Eliud Owalo on Wednesday.

He added that the government had already taken over all the services provided by E-Citizen, with plans to add 1,200 new services monthly.

Previously, a private company was in charge of the website, which offers services such as driving license and passport application and renewal.

“We are projecting that the over 5,000 government services will be online by the end of July as we digitise all our services,” he said.

The CS also expressed the government's concern about the cost of Internet, stating that they were in talks with telecommunications companies about the issue.

To address this, he indicated that plans were in the works to establish 25,000 free Wi-Fi hotspots and 1,450 digital hubs, most of which would be located in areas with limited or no Internet connection.

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