NEW NSSF RATES 2025

Effective 1st February 2025, the NSSF contributions rate have been increased in accordance with the schedule 3 of the NSSF Act No 45 of 2013. The increase is part of the third phase of the phased implementation of the NSSF ACT 2013 which aims to enhance the retirement benefits of employees by gradually increasing the contribution rates over a period of 5 years.

What are the new rates?

Employees and employers will contribute 6% of the employee’s monthly salary to the NSSF.

What are the contribution limits?

For Tier I which is the lower earnings limit: Contribution base has been adjusted from KSh 7,000 to KSh 8,000.

For Tier II which is the upper earnings limit: The contribution base has been adjusted upward from KSh 36,000 to KSh 72,000.

The above contributions are due by 9th of every month. 

Impact of the NSSF Increased rates.

  • Increased pension savings for the employees
  • Decrease on the employees net pay
  • Increased staff costs due to the increased employer contribution

Opting out (for Tier II contributions)

Employees who are already contributing to a registered pension scheme are eligible to opt out of the NSSF contributions for Tier II only, as long as the pension scheme meets the regulatory requirements set by the Retirement Benefits Authority (RBA).

The opting out is exercised as follows;

  1. The employer shall make written request of its intention to opt out to the  Retirement Benefit Authority at least sixty days before opting to contract-out 
  2. The Retirement Benefit  Authority shall require from time to time in order to ascertain that the contracted-out scheme meets the Reference Scheme Test;
  3. The  Retirement  Benefit Authority shall respond in writing  within 30 days indicating its approval or otherwise  to the employer and notify the Board accordingly;
  4. Upon approval is received, Tier II Pension Fund Credits in respect of the employees shall be transferred from the Pension Fund to the approved contracted- out scheme;

Conclusion

We recommend that you review your payroll system and ensure that the new contribution rates are implemented starting February 2025. If you have employees who are eligible to opt out of Tier II contributions, ensure that the necessary documentation is submitted to the Retirement Benefit Scheme for consideration/approval.

At MGK, we are available to support you in the transition management arising from the changes. Reach to our Payroll Support Team on bkamau@mgkconsult.co.ke

Example 1: Employee Earning KSh 50,000 Monthly

  • Tier I Contribution: 6% of KSh 8,000 = KSh 480
  • Tier II Contribution: 6% of (KSh 50,000 – KSh 8,000) = 6% of KSh 42,000 = KSh 2,520
  • Total Monthly Contribution: KSh 480 (Tier I) + KSh 2,520 (Tier II) = KSh 3,000. 
  • Total employer and employee contribution: KSh 3,000 + KSh 3,000= KSh 6,000.

Example 2: Employee Earning KSh 72,000 or more per month

  • Tier I Contribution: 6% of KSh 8,000 = KSh 480
  • Tier II Contribution: 6% of (KSh 72,000 – KSh 8,000) = 6% of KSh 64,000 = KSh 3,840
  • Total Monthly Contribution: KSh 480 (Tier I) + KSh 3,840 (Tier II) = KSh 4,320
  • Total employer and employee contribution: KSh 4,320 + KSh 4,320= KSh 8,640.