How Your Net Salary Will Reduce in New NSSF Rates for February 2025

Salaried Kenyans will once again feel the pinch of a reducing take home at the end of February 2025. The third phase of implementing the NSSF Act 2013 takes effect in February, allowing the government to deduct more from their payslips.

Employees earning a monthly salary, regardless of their income bracket, will see increased deductions from their paychecks. The deductions are legally binding and employers are required to match employee contributions, further increasing the cost of doing business in Kenya.

The Math

Until now: The lower limit for pensionable income is Ksh7,000 while the upper limit for pensionable income is capped at Ksh 36,000, meaning the maximum NSSF deduction is Ksh 2,160 from the employee and an equal amount from the employer, totalling Ksh 4,320.

• From February 2025:  The pensionable income lower limit will increase from Ksh7,000 to Ksh8,000. The upper limit will increase to Ksh72,000. 
• The net effect is that the deduction for NSSF Tier 1 will increase from Ksh420 to Ksh480. The Tier II limit will increase from the current Ksh1,740 to Ksh3,840. 
• The overall limit on NSSF deductions will increase from Ksh2,160 to Ksh4,320 - to be matched by the employer. 

For perspective, a Kenyan earning Ksh50,000 will see their NSSF contribution rise from Ksh 2,160 in January to Ksh3,000 in February before other taxes such as housing levy are deducted. The net pay for such a Kenyan will reduce from Ksh39,617 to Ksh39,029. 

Similarly, a Kenyan employee earning Ksh 80,000 will now contribute Ksh 4,320, up from Ksh 2,160 while their net pay will reduce from Ksh59,724 to Ksh58,212. 

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Why the Change?

The NSSF contribution structure has been reformed, introducing a two-tier system and replacing the older NSSF Act (Cap 258). It was signed into law in December 2013 and was supposed to take effect in January 2014. However, its implementation was halted due to court cases that lasted for close to ten years. 

On February 21, 2024, the Supreme Court of Kenya gave its verdict, overturning the Court of Appeal's decision which had barred the deductions and allowed the implementation of the National Social Security Fund (NSSF) Act 2013.

February salaries, which are typically processed in early March, are therefore going to be slashed as per the two-tier system.

The amendments to the NSSF Act were introduced by the government to ensure workers can retire with greater financial security. The previous contribution structure, which had remained unchanged for decades, was deemed inadequate in providing sufficient retirement benefits.

Both the Federation of Kenya Employers (FKE) and the Central Organisation of Trade Unions (COTU) have supported the new NSSF Act 2013, leaving salaried Kenyans to bear the brunt of the changes.

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How Will This Affect Employers?

Kenyans’ take-home pay is set to decrease significantly. The contributions are split between the employer and the employee, with each party contributing 6% of the employee’s monthly pensionable earnings, as follows:

For businesses, particularly small and medium-sized enterprises (SMEs), cash flow will be strained as they struggle to match the mandated employee contributions to the NSSF kitty.

Remittance to the fund should be made by the 9th day of each subsequent month as per the NSSF directive sent to the public.

As millions of Kenyans continue to grapple with the rising cost of living, the new NSSF deductions add yet another strain to what many feel are already over-taxed payslips. With reduced take-home pay and mounting financial pressures, Kenyans are sure to voice their frustrations loudly as they check their bank accounts. While the reforms aim to secure a better retirement future, the immediate financial burden underscores the delicate balance between long-term benefits and short-term survival in an increasingly challenging economic landscape.

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