Littler Global Guide - Kenya - Q1 2024

Browse through brief employment and labor law updates from around the globe. Contact a Littler attorney for more information or view our global locations.

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Social Health Act Goes into Effect July 2024

New Legislation Enacted

Authors: Sonal Tejpar, Partner, and Edwina Warambo, Senior Associate – Anjarwalla & Khanna LLP

For many years, employers have been required to be registered contributors to the National Hospital Insurance Fund (NHIF) pursuant to the National Health Insurance Fund Act (Cap 255) (the NHIF Act) and have been required to deduct contributions from their employees’ salaries. The law has been overhauled with the introduction of the Social Health Insurance Act, No. 16 of 2023 (Social Health Act), which went into effect on November 22, 2023, and is set to replace the NHIF Act in July 2024.

A summary of the key highlights of the Social Health Act are:

  • Creation of the Social Insurance Authority, which will take over all the functions of the NHIF
  • Establishment of three new funds:
    • the Social Health Insurance Fund (SHIF)
    • the Primary Health Fund (PHF)
    • the Emergency, Chronic, and Critical Illness Fund

Social Health Insurance (General) Regulations, 2024 (the Regulations) applicable to the SHIF have been published but are still undergoing public comment. Under the regulations, individuals whose income is from salaried employment will have a 2.75% monthly deduction from their salary. This rate is, however, subject to approval.

Changes to the Contributions Required to Be Made to the National Social Security Fund (NSSF)

Precedential Decision by Judiciary or Regulatory Agency

Authors: Sonal Tejpar, Partner, and Edwina Warambo, Senior Associate – Anjarwalla & Khanna LLP

The NSSF Act, 2013 (the NSSF Act) makes it mandatory for an employer to make a direct contribution of 6% of the employee’s monthly pensionable earnings and to deduct and contribute 6% of the employee’s pensionable earnings. However, until very recently implementation of these rates has stalled due to several challenges which have been the subject of protracted litigation. The matter was recently heard by the Supreme Court which has directed the Court of Appeal to expedite a ruling. In the meantime, the current monthly contributions of KES 200 by the employer and employee will increase to KES 420 . These are known as Tier 1 contributions which are mandatory. In addition, both employers and employees will have to contribute Tier II contributions. The amount of these contributions will be KES 1740 for each.

It will be possible for employers to opt out of Tier II contributions if they have a private pension scheme for their employees with similar or better benefits.

Affordable Housing Levy Law Now in Effect

New Legislation Enacted

Authors: Sonal Tejpar, Partner, and Edwina Warambo, Senior Associate – Anjarwalla & Khanna LLP

On March 19, 2024, the Affordable Housing Levy Act, 2024 went into effect requiring mandatory contributions by employers and employees at the rate of 1.5% of the employee's monthly gross salary or gross income, each. There are ambiguities in the Act, such as the lack of definition for "gross income" and how to determine monthly income for those without a salary, and legal challenges seeking to halt the Act's implementation have been unsuccessful.

The Housing Levy will be deducted from employees' salaries starting in March 2024. The levy has implications for both employers and employees, including:

  • Increased contributions will reduce take-home pay for employees and increase labor costs for employers
  • Employers face compliance challenges, such as adjusting payroll systems
  • Increased costs may affect hiring, wages, and budgeting decisions
  • Reduced take-home pay may affect employee morale and retention

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.