Background
On 19th September 2022, in Petition No. 38 of 2014 – Kenya Tea Growers Association & 8 others v. National Social Security Fund Board & Others a three Judge bench of the Employment and Labour Relations Court (ELRC) declared the National Social Security Fund Act, 2013 (the NSSF Act) to be unconstitutional. In their Judgment, the learned Judges held that the NSSF Act fell short of the dictates espoused in the Constitution majorly on the grounds that the NSFF Act: (i) was inconsistent with the Competition Act; (ii) compelled mandatory contribution into the National Social Security Fund (the Fund) for both the employees and the employers despite one’s membership in alternative social security schemes; (iii) was improperly enacted for flouting the legislative procedures, among others. The decision comes at interesting times when the country’s leadership is pushing for a more robust social security framework for its citizens.
It is apposite, so as to put the matter into context, to briefly delve into the history of the Fund. The Fund was established under the National Social Security Fund Act (Cap. 258) Laws of Kenya (the old NSSF Act) in the year 1965. The old NSSF Act was established as a mandatory national social security scheme whose foremost objective was to provide basic financial security benefits to Kenyans. The Fund was designed to give upon retirement, a lump sum, with all Kenyans over the age of 18 obligated to register with the Fund whether or not employed in the formal or informal sectors of the Economy.
In an attempt to revitalize the Fund, a new statute, the NSSF Act was enacted in 2013 which made the participation for both employers and employees compulsory. Under the NSSF Act, employees were required to contribute six percent (6%) of their pensionable earnings while the employer contributed an equivalent amount for each employee. In the event, various petitions were filed challenging the constitutionality of the NSSF Act, with the question before the ELRC was whether the NSSF Act passed Constitutional muster.
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This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact John Mbaluto FCIArb, Deputy Managing Partner, ([email protected]), Daniel Kiragu, Senior Associate, ([email protected]) and Ajak Jok Ajak, Advocate ([email protected]) or your usual contact at our firm, for legal advice.
