Shame of 150 State agencies sitting on Sh35b deductions

Kenya Broadcasting Corporation

The Kenya Broadcasting Corporation offices.

Photo credit: File | Nation Media Group

Thousands of workers in parastatals risk not getting their full pensions upon retirement and risk being denied medical services and Sacco loans as State corporations have failed to remit Sh35 billion deducted from employees.

A document submitted to Parliament by Treasury indicates that corporations are struggling in meeting their financial obligations.

Among the deductions that have not been remitted by the institutions include Pay as You Earn (Paye), National Social Security Fund (NSSF), National Health Insurance Fund (NHIF), as well as deductions of Sacco, loans, and pension contributions.

The unremitted statutory deductions for the 150 institutions cumulatively add up to Sh35, 189,136,021.

In all, the parastatals have cumulative pending bills of Sh400.68 billion, which, besides staff deductions, also includes payments owed to contractors and suppliers.

The failure to remit the critical statutory deductions means many may have little to live on in their sunset days.

The agencies’ troubles are likely to add more pain to the workers who are already faced with high cost of living in the current tough economy.

The document was sent to Parliament as most corporations who appear before various committees normally complain that they do not have money to settle pending bills and remit the statutory deductions.

To find out the truth, Parliament requested a report on the status of the pending bills as at December 2022.

Among the bodies that have failed to remit deductions to NSSF, NHIF, Saccos and the taxman include the Media Council of Kenya, the Kenya National Examinations Council, the Kenya Broadcasting Corporation, the Kenya Ferry Services and the Postal Corporation of Kenya.

The documents show that the media council has not remitted Paye amounting to Sh743 million; NSSF contributions amounting to Sh391 million; NHIF deductions totalling to 2.005 million unremitted staff Sacco deductions amounting to Sh1.765 billion.

The council also has unremitted staff loan deductions totalling to Sh50 million. It also owes suppliers Sh159.251 million.

The Employment Act mandates employers to deduct and remit a certain percentage of an employee’s salary and remit the same to KRA as Paye, the NHIF among other bodies.

The NSSF Act and the Employment Act treat non-remittance of these statutory deductions as criminal.

“An employer who fails to comply with the provisions ... commits an offence and shall on conviction be liable to a fine not exceeding Sh100,000 or to imprisonment for a term not exceeding two years or to both,” the Act reads in part.

The Kenya Broadcasting Corporation has not remitted Sh325.3 million of staff Paye. It has Sh27.3 million of unremitted staff Sacco deductions and Sh2. 67 billion of pension arrears for its employees. The national broadcaster also owes suppliers  Sh315 million.

The Kenya Ferry Services has a total of Sh32 million of unremitted staff Sacco deductions. In addition, it owes suppliers 169,609,281.

The Postal Corporation of Kenya has an outstanding Sh478 million of staff Paye. It has also not remitted Sh51 million in staff Sacco deductions and another Sh343 million in staff loan deductions. The corporation has also not remitted Sh1.2 billion in staff pension arrears. The corporation also owes suppliers Sh2. 9 billion.

Risking prosecution

At East African Portland Cement, Sh2. 6 billion of staff Paye has not been remitted. In addition, it has not paid suppliers Sh1.9 billion.

Mr Peter Muiruri, the property development manager at NSSF, told the Sunday Nation that they have prosecutorial powers to compel employees to remit deduction or face a penalty of five percent per month on the amount defaulted.

“The penalties are normally very harsh.  It is a five per cent penalty per month which is 60 percent in a year. That is very expensive to the employer,” he said.

He explained that upon retiring, one will get the benefits up to the period the remittance was stopped but his account is not closed as NSSF follows up with the employer to pay the balance which will be paid immediately to the retiree.

“Employees should not worry about their savings. So long as they can prove from their payslip that they were being deducted, they will always get their money,” Mr Muiruri said.

Mr Anthony Mwaura, the chairman of the board of the Kenya Revenue Authority, told the Sunday Nation that the account of the employees will indicate that they owe the taxman until the amount is cleared.

“The employees cannot get a tax clearance certificate because their tax ledgers would be showing tax credits. This would remain the case until the employers remit the taxes,” Mr Mwaura said.

The situation at most public universities is very dire as they have millions of accumulated statutory deductions that are yet to be remitted.

Some of the leading agencies with high pending bills of suppliers include Kenya Railways Corporation (Sh14.4 billion) National Oil Corporation (Sh3.6 billion), and Kenya Seed company (Sh2 billion).