Introduction
Pursuant to the National Social Security Fund (NSSF) Act and its prescribed five-year phased implementation plan, the 4th year of implementation will take effect in February 2026 with the revised NSSF contribution rates. These statutory changes form part of the gradual alignment of pensionable earnings and contribution limits and will have direct implications on payroll administration, employee deductions and employer compliance obligations.
Implications
i. Employees earning up to KES 72,000, the monthly NSSF contribution remains capped at KES 4,320.
ii. For employees earning above KES 72,000, contributions will increase progressively.
iii. Effective February 2026 ( Year 4) , an employee’s monthly NSSF contribution is capped at KES 6,480.
iv. Lower salary bands remain unchanged, while higher earners will be impacted by the revised cap.
v . Employers will have to update payroll systems to reflect the revised NSSF rates effective February 2026 payroll.
vi. Review of employment contracts and staff communications to align with the revised statutory deductions
Strategic Options for Employers
To adapt to these changes including managing overall retirement costs, employers can consider to:
1.Opt-Out of Tier II with RBA Approval
Employers can contract out Tier II contributions to a qualifying private pension scheme approved by the Retirement Benefits Authority (RBA). This allows redirection of part of the Tier II NSSF contribution into a private scheme.
2. Adjust Provident Fund Contributions
Employers who opt to maintain tier two can consider reducing contributions to employer-sponsored provident funds to offset the impact of higher NSSF deductions.
This can avoid double contributions (i.e., paying high NSSF plus high private fund contributions). Employers need to communicate changes clearly to employees and ensure legal compliance.
Conclusion
In view of the above, employers and members of the public are advised to review the revised NSSF contribution structure in advance of the February 2026 effective date and make the necessary adjustments to payroll systems, budgeting, and employee communications. Early preparation will ensure seamless compliance with the NSSF Act and minimize potential disruptions arising from the implementation of Year 4 of the phased contribution plan. Stakeholders are encouraged to seek professional advise.