How the New NSSF Contribution Rates Will Affect Your Pay Slip from February 2025

 

Overview

 

Kenyan employees will experience changes in their pay slips starting February 2025 due to the continued implementation of the National Social Security Fund (NSSF) reforms. These reforms, which began in 2023, aim to increase retirement benefits by gradually raising contribution rates over five years.

 

Understanding the New NSSF Contribution System

 

Under the NSSF Act, 2013, all employees covered by the Employment Act, aged 18 and above but below retirement age, must contribute 6% of their pensionable earnings to the fund. This amount is equally shared between the employer and the employee.

 

The contribution system is divided into two tiers:

Tier I: Covers earnings up to the Lower Earnings Limit and is directly remitted to NSSF.

 

Tier II: Covers earnings above the Lower Earnings Limit and can either be remitted to NSSF or a private pension scheme chosen by the employer.

 

 

Contribution Changes in 2025

 

From February 2025, the contribution limits will increase as follows:

 

Tier I: The limit will rise from Ksh7,000 to Ksh8,000, meaning a 6% deduction of Ksh480 from employees’ salaries.

 

Tier II: The upper limit will increase from Ksh36,000 to Ksh72,000, meaning a 6% deduction of Ksh3,840 for employees earning above this threshold.

 

 

These deductions must be matched by employers, effectively doubling the savings for employees.

 

Impact on Different Salary Levels

 

For an employee earning Ksh80,000:

 

Tier I contribution: Ksh480

 

Tier II contribution: Ksh3,840

 

Total employee contribution: Ksh4,320

 

Employer matches this amount, making the total savings Ksh8,640

 

 

For an employee earning Ksh50,000:

 

Tier I contribution: Ksh480

 

Tier II contribution: Ksh2,520

 

Total employee contribution: Ksh3,000

 

With the employer match, total savings rise to Ksh6,000 (up from Ksh4,320 previously)

 

 

For an employee earning Ksh40,000:

 

Tier I contribution: Ksh480

 

Tier II contribution: Ksh1,920

 

Total employee contribution: Ksh2,400

 

Employer match brings total savings to Ksh4,800 (up from Ksh4,320)

The latest increase in NSSF contribution rates is part of a broader plan to strengthen retirement savings for Kenyan workers. While it means higher deductions from salaries, it also leads to increased long-term benefits. Employers and employees should prepare for these adjustments in the February 2025 payroll.