The NSSF contribution rates for Kenyan companies and employees will change in February 2025, and workers will face increased deductions. This change is the third stage of the NSSF Act of 2013's phased implementation, which intends to improve workers' retirement benefits by progressively raising contribution rates over five years. The amended NSSF Act 2013 introduced new higher rates and extended the contribution base to cover workers in the informal sector.
What are the Lower and Upper NSSF Limits for 2025?
As Kenya moves toward improving retirement benefits, the NSSF has revised its contribution rates. The increased rates will see higher and lower-income limits increased to KSh 72,000 and KSh 8,000, respectively. This updated system is divided into two tiers:
- Tier I (Lower Limit): Covers employees earning up to KES 8,000.
- Tier II (Upper Limit): Covers employees earning between KES 8,000 and KES 72,000.
The NSSF Act of 2013 states that the highest deduction will increase from KSh 2,160 to KSh 4,320, and the lowest contribution will increase from KSh 420 to KSh 480.
How Are NSSF Contributions Calculated?
The 6% rule applies to both employees and employers, meaning each contributes 6% of pensionable earnings. Here’s how it works:
- If an employee earns KES 10,000, KES 8,000 is considered under Tier 1, while the remaining KES 2,000 falls under Tier 2.
- If an employee earns KES 72,000 or more, their maximum total NSSF contribution (employer + employee) will be KES 8,640.
- If someone’s gross wage is less than or equal to KES 8,000, only Tier I applies. They (and their employer) contribute 6% of that wage.
Employers may contract out Tier II (i.e., pay Tier II into a private approved pension scheme) subject to meeting regulatory requirements, but Tier I must go to NSSF.
Impact on Employees
The increased contributions reduce net salary, but they boost retirement savings. Employees earning below KES 8,000 will contribute only to Tier 1, keeping their contributions lower. Those earning above KES 72,000 will max out their contributions at KES 8,640 per month (KES 4,320 from employee, KES 4,320 from employer).
Contribution Summary Table
Below is a summary of contributions for different salary levels:
| Salary | Tier I NSSF | Tier II NSSF | Employee Contribution | Employer Contribution | Total |
|---|---|---|---|---|---|
| 50,000 | 480 | 2,520 | 3,000 | 3,000 | 6,000 |
| 60,000 | 480 | 3,120 | 3,600 | 3,600 | 7,200 |
| 70,000 | 480 | 3,720 | 4,200 | 4,200 | 8,400 |
| 80,000 | 480 | 3,840 | 4,320 | 4,320 | 8,640 |
| 100,000 | 480 | 3,840 | 4,320 | 4,320 | 8,640 |
Following the court's lifting of restrictions, the government put the National Social Security Fund (NSSF) Act 2013 into effect, which increased the NSSF monthly contributions tenfold.