•According to FKE, the move has a direct financial impact on payroll costs and on the employees’ take-home pay.
•Before the Act is implemented, the federation is urging the government to ensure stakeholder engagement sessions are held.
The increase in pension contributions will be an expensive undertaking to both employers and employees, the Federation of Kenya Employers (FKE) has said.
According to FKE, the move has a direct financial impact on payroll costs and on the employees’ take-home pay.
"We therefore propose a phased-out approach. Otherwise, the proposed scheme runs the risk of destabilising the very beneficiaries it intended to assist and jeopardising private pension schemes,” FKE said in a statement on Wednesday evening.
Before the Act is implemented, the federation is urging the government to ensure stakeholder engagement sessions are held, so that both workers and employers have ample time to adjust their budgets to accommodate the sharp increases on their retirement savings.
"We need to consider the tough economic situation the country is currently facing when the real challenge facing many Kenyans is how to put bread on the table,” it added.
President William Ruto’s administration is keen to implement the NSSF Act, which seeks to increase contributions.
This is after the Court of Appeal overturned an earlier decision by the Employment and Labour Relations Court, which had declared the Act null and void.
The NSSF Act, 2013 increased salaried employees’ monthly deductions from Sh200 to Sh600 for the lowest earner and from Sh320 to Sh1,080 for top earners.
The upper limits on contributions are set to rise every year.
The total pension contribution for both the worker and employee is supposed to be a maximum of Sh4,136, being 12 percent of the proposed maximum pensionable earnings of Sh34,476.
Both employees and employers were to remit six percent each.
FKE together with other bodies, among them the Agricultural Employers Association (AEA) and Kenya County Government Workers Union had moved to court.
According to FKE, it has over the years worked hand-in-hand with the government to implement robust and progressive initiatives to improve the lives of Kenyans.
FKE calls for caution in instances where far-reaching proposals are made which have negative impact on the capacity and stability of enterprises which form the backbone of Kenya’s economy,”it said.
Employers still hold the view that pension is an employer-employee issue and touches on benefits that fall within the provisions of the employment contract, it said.
Therefore, the Employment and Labour Relations Court has the jurisdiction to determine the issues arising out of this employment issue, FKE adds.
This includes the interpretation and declaration on the constitutionality of a statute that regulates Pension benefit and other terms and conditions of employment .
"In our view, the issue whether the new NSSF Act 2013 satisfied the constitutional threshold of public participation before being enacted into law has not been adequately addressed. This is a fundamental aspect that makes it difficult for employer to support the push to have the law implemented as it is,”the statement reads.
It has since appealed to the government to kick start a social dialogue mechanism for smooth transition from the old Act to the New Act, given the far-reaching nature of the changes.