Legal Provision Governing Employee Social Security (NSSF, NHIF, PENSIONS)

It is mandatory under the industrial law of Kenya for employers to offer social security to employees. This is because employees get sick and need to seek treatment. Their nuclear families also need to be protected and assisted in paying hospital bills through their health insurance fund. In addition, the employee will retire at one time due to different reasons and hence permanent employees need to have a pension scheme or NSSF if they are not permanent.

National Social Security Fund (NSSF)

The national social security fund Act (cap226) establishes the NSSF as a compulsory social security scheme whose objective is to receive contributions for employers and employees as well as make payments to employees when they leave the organization. The employer is expected to contribute fifty percent of the contribution while the employee contributes the other fifty percent. Standard NSSF (currently under review) contribution is Ksh 200 deducted from employee’s salary, with employer contributing an equal amount. Failure to comply is a criminal offence subject to a penalty equal to five per cent of the amount payable and a fine of up to ksh 15,000.

The contributions are intended to benefit an employee. There are five main benefits paid to contributors by NSSF which are: Age benefits, Withdrawal benefits, Invalidity benefits, Survivor’s benefits and Emigration grants. Age benefits are paid to beneficiaries or dependants of deceased members such as their spouses or children but where none of them exist, the parents, brother, sister or dependent relative receive the benefits which may e divided amongst them according to the wishes of the deceased.

Invalidity benefits are paid to nay members who suffer permanent or partial incapacity or mental disability while withdrawal benefits are paid to persons who reach the age of fifty five. Emigration benefits is payable to a member who is moving from Kenya to reside in another country. However such, as an employee cannot be given his benefits if he will ever come back and his money transferred to the host country. All these payments are given by the director of the fund in cheque and are paid in lumpsum.

NSSF applies to all employees whether in public or private sector as long as they become contributors except: people working in universities or colleges which have their own social security schemes, non-civilian employees such as those employed in armed forces; people who do not reside in Kenya; and persons undergoing full time education.

National Hospital Insurance Fund (NHIF)

The NHIF Act (Cap 255) establishes the NHIF, which is an insurance fund, which caters for medical insurance and pays for expenses incurred by a contributor, and his or her spouse and dependant children. From 1990 onwards, all employers are given a legal notice requiring them to deduct NHIF contribution from employee’s salary. Failure to comply is a criminal offence subject to a penalty equal to five times the amount of that contribution.

NHIF is therefore the primary provider of health insurance in Kenya with a mandate to enable all Kenyans to access quality and affordable health services. Membership is mandatory for all Kenyans above 18 years of age.

The benefits package includes comprehensive medical coverage for all diseases(NHIF Act, section 22).This means that NHIF members, whose majority is from the formal sector can be fully treated at the cost to the NHIF without making additional payments.


Pension is the amount of money paid to a retiree who is employed on permanent and pensionable basis. It is paid regularly until the retiree dies. Section 9 and 10 of the employment Act, 2007 specifies that an employee shall be employed under a contract of service which shall include pensions and pension schemes in which the employee is involved. Section 17 of the pensions Act , provides for the payment of pension benefits to dependants upon the death of an employee in service or on retirement on condition that the employee has worked for ten or more years service.

The pensions Act cap 189,provides for the granting and regulating of pensions, gratuities and other allowances in respect of the public service of officers under the Government of Kenya. In addition there are allowances in respect of the public service of officers under the government of Kenya. In addition there are private retirement benefits schemes governed by the Retirement Benefits Act, 1997(Revised2010). Through which private employers and their employees as members make contributions towards retirement.

The Retirement benefits Act

The retirement Benefit Act was enacted to provide a regulatory framework for the retirement benefits industry. This framework was needed to streamline the industry and gain the required confidence from stakeholders and employees to enable them save more for retirement and contribute towards the national effort of raising the domestic savings rate. The Act created the retirement Benefits Authority to oversee the industry’s management and development in a prudent and appropriate manner.

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