Nairobi | Kampala | Kigali | Addis Ababa
Home » Insights » NSSF Act Back on Track – Impact of The Judgment in Nairobi Civil Appeal No. 656 of 2022 The National Social Security Fund Board of Trustees vs. Kenya Tea Growers Association & Another

NSSF Act Back on Track – Impact of The Judgment in Nairobi Civil Appeal No. 656 of 2022 The National Social Security Fund Board of Trustees vs. Kenya Tea Growers Association & Another

The Court of Appeal in Civil Appeal No. 656 of 2022 The National Social Security Fund Board of Trustees v Kenya Tea Growers Association & Another has held that the ELRC lacked the requisite jurisdiction to entertain the constitutionality of the Act, the subsequent orders made by the ELRC therefore do not have a binding effect. The NSSF Act, 2013 whose implementation commenced on 10th January, 2014 is therefore in force and the sections of the Act that had been declared unconstitutional now have a legal effect. It is therefore mandatory to register and contribute to the NSSF.

The appeal arose from the decision in ELRC No. 38 of 2014 Kenya Tea Growers Association & Another V The Hon Attorney General & The National Social Security Fund Board of Trustees (Consolidated with Petition 34, 35, 36, 49 & 50 Of 2014) where the court had declared the whole Act to be unconstitutional for failure to have it presented to the Senate yet it affected the functions of the counties. The court also went ahead to declare the mandatory sections unconstitutional for failing to appreciate the employee’s autonomy.

On appeal, the Court took a view that the ELRC had no jurisdiction to entertain the petition since the same did not arise in the context of an employer-employee dispute. In justifying its decision, the court placed emphasis on the provision of section 12 (1) (a)-(f) of the Act establishing the Court. The court went further to assert that a claim questioning constitutional validity of a statutory provision was not merely an ancillary claim to the issue before the court nor did the issue arise during the adjudication of the dispute. Consequently, the court vacated the ELRC decision in its entirety and declared the entire proceedings at the ELRC a nullity.

The court also delved into the substratum of the petition which mainly challenged the constitutionality of the whole Act for failing to adhere with the provisions of Articles 205(1) and 110 of the Constitution. In its decree, the court noted that the ELRC erred in law by holding that the concurrence of the Senate and the National Assembly was required in enacting the impugned legislation. The court was of the view that the objects of the NSSF Act, 2013 fell perfectly within the functionalities of the national government and as such, the concurrence of the Senate was not required. To this end, the court of appeal vacated the ELRC decision.

The Implication of the Judgement

With the Court holding that the ELRC lacked the requisite jurisdiction to entertain the constitutionality of the Act, the subsequent orders made by the ELRC therefore do not have a binding effect. The NSSF Act, 2013 whose implementation commenced on 10th January, 2014 is therefore in force and the sections of the Act that had been declared unconstitutional now have a legal effect. It is therefore mandatory to register and contribute to the NSSF.

Key features of the NSSF Act No. 45 of 2013

1. Provident Fund and Pension Fund

Section 18(1) of the Act provides for the establishment of both the Provident Fund and Pension Fund. The pension fund is mandatory covers all workers in the formal economy. The Provident fund is voluntary and covers mainly the self-employed individuals.

2. Payment Contributions to the Pension Fund

Out of the monthly pensionable earnings, an employer is required to pay to the Pension Fund:

  • Employer’s contribution at 6% of the employee’s earnings
  • Employee’s contributions at 6% being deducted from the monthly earnings

Employees earning above Sh18,000 are divided into two levels of contributions called tier I and tier II. Employees and employers under the tier two category (those above the lower limit) are required to contribute each Kshs. 720 monthly to attain a total of Kshs. 1,440 per month from both parties. On the other hand, those under tier one is required to contribute Kshs. 360 per month, and their employers should match the same.

The Lower Earnings Limit and the Upper Earnings Limit in accordance to the 3rd Schedule of the NSSF Act, 2013.

Figure I; the Lower Earnings Limit and the Upper Earnings Limit in accordance to the 3rd Schedule of the NSSF Act, 2013 

Year Lower Earnings Limit Upper Earnings Limit
1. 6000 50% National Average Earnings
2. 7000 1 times National Average Earnings
3. 8000 2 times National Average Earnings
4. 9000 3 times National Average Earnings
Year 5 onwards Lower Earnings Limit as provided in regulations 2(a) of this Schedule 4 times National Average Earnings

In keeping with the schedule, the NSSF published the rates expected from employers and employees under the Fund as follows.

Contributions Employer contribution Employee Contribution
Tier 1 Kshs. 360 Kshs. 360
Tier 2 Kshs. 720 Kshs. 720

The total contributions for both Employee and Employer is Kshs. 2,160/= monthly.

Web Hosting
Domain Registration
Website Design