Payslip deductions cross 20pc as State drops caps on NHIF

Compulsory monthly statutory deductions will take at least 20.5 percent from Kenyans earning Sh50,000 and above when higher contributions towards funding healthcare kick in, deepening the government’s onslaught on payslips.

The government has proposed to increase deductions towards healthcare from the current range of Sh150 to Sh1,700 to a flat rate calculated at 2.75 percent of gross monthly earnings.

The new contribution plan has not been capped at Sh5,000 as had been alluded to earlier by several government officials, including Health Cabinet Secretary Susan Nakhumicha.

“A household whose income is derived from salaried employment shall pay a monthly statutory deduction contribution to the Social Health Insurance Fund at a rate of 2.75 percent of the gross salary or wage of the household by the ninth day of each month,” reads the draft.

While those with a monthly income of up to Sh30,000 will see a drop of between three percent and 45 percent in contributions towards funding healthcare, those earning more than this amount will pay more. One with a gross pay of Sh1 million will be deducted Sh27,500, nearly 17 times.

The looming hit will cut further the take-home income for Kenyan workers whose monthly earnings have been hit by the housing levy and increased contributions to the National Social Security Fund (NSSF) amid the pain of personal loans in an environment of rising interest rates.

The raid on payslips comes at a time when workers are on course for a possible fourth straight year of inflation-adjusted pay cuts and are already feeling the pinch of prices of basic commodities and upward adjustments on school fees, transport and food budgets for learners.

The deductions highlight the pain of workers in funding President William Ruto’s universal healthcare coverage (UHC), affordable housing and enhanced pension in addition to other budgetary needs.

Another lingering payslip worry for workers will be the Treasury’s proposal in the revenue strategy for the medium term to scrap the Sh2,400 monthly tax relief as early as July next year.

These will see more employees breach the Employment Act 2007, which stipulates that deductions — whether statutory or voluntary— should not exceed two-thirds of total salary.

The government has given the public up to December 12 to give views on the Social Health Insurance (General) Regulations, 2023 that will operationalise the Social Health Insurance Act that was gazetted last week.

The move is despite the High Court on Monday halting the implementation of the Act, partly on the grounds that the clause barring Kenyans not registered to the Fund from accessing government services is illegal.

President William Ruto last week directed Ms Nakhumicha to expedite the consultations for deductions to set in come January.

This means the State will— through the pay-as-you-earn (PAYE), NSSF, housing levy and health care contribution— take about Sh10,264 or 20.5 percent from those earning Sh50,000 gross pay, up from the current Sh8,460.

The State in February increased the compulsory deduction towards retirement from a flat rate of Sh200 to a maximum of Sh1,080, with further increments planned in line with the National Social Security Fund Act, 2013.

Those earning Sh100,000 will be given Sh27,389 or 27.4 percent, with the pain deepening for top earners.

Higher healthcare contributions, combined with the new housing levy, and a new band of Paye of 35 percent, NSSF will see Kenyans earning more than Sh200,000 a month give the State at least 30.8 percent of their earnings from the current 27 percent.

A Sh200,000 payslip will cede Sh61,639 from the current Sh53,959, being an additional Sh7,680 while workers earning Sh500,000 face deductions of Sh164,389 (33 percent), up from Sh143,959.

An Sh800,000 earner will give the State Sh276,106 or 34.5 percent, being an additional Sh42,147.

The Social Health Insurance Act paves the way for the phasing out of the 57-year-old National Health Insurance Fund (NHIF) and in its place creates three funds to run the UHC programme.

One of the funds will be for preventive and primary health care; another for primary referrals and the third will foot treatment of chronic diseases.

Those without proof of up-to-date contributions will be denied State services under the proposed regulations that will bring social health care membership to the same league as Kenya Revenue Authority Personal Identification Numbers.

“A public officer or public entity shall undertake such compliance checks as may be necessary including requesting a person seeking a government service in the public entity to provide their social health insurance number,” reads the draft regulations in part.

This means that non-contributors to the health scheme will be barred from making critical transactions such as registration of land titles, approval of development plans, and transfer and licensing of motor vehicles.

The draft also says such people will not be allowed to tap student loans for higher education, get appointed to public offices, sell or buy property, get tax compliance certificates or access transfers for social assistance and government subsidy.