PENSION SCHEMES: IS IT MANDATORY TO REGISTER WITH AND CONTRIBUTE TO NSSF?

Kenya Tea Growers Association & 97 others v Attorney General & 8 others; Central Organization of Trade Unions (COTU) & another (Interested Parties) (Petition 38, 34, 35, 49 & 50 of 2014 (Consolidated) [2022] eKLR

The Employment & Labour Relations Court: in rendering its judgment in the matter, stated that the mandatory requirement to register with and contribute to NSSF was in contravention of the Competition Act as the NSSF was using statutory provisions to its advantage against other pensions. Therefore, it is not mandatory to register with NSSF.

Our take:

The reading of s 35 (1) (c), as read together with s 35 (5) and s 35 (6) of the Employment Act, provides that an employee receiving a termination notice is entitled to service pay for every year worked unless such an employee is a member of a registered pension or provident fund (under Retirement Benefits Act), gratuity or service pay scheme (under a collective agreement), any scheme established and operated by the employer that is favourable than those of the service pay scheme under s 35 and NSSF.

An Employer should note that other than providing its employee with welfare packages such as a pension, a well-structured pension can provide an Employer with better financial planning and anticipation of costs when an employee’s contract is terminated as envisioned under s 35 of the Employment Act.

Therefore, the key question that the HR and CFO should ask themselves is, “while it is not mandatory, is it necessary to cooperate with NSSF as per the statutory bare minimum standards under s 35 of the Employment Act and the corporation’s internal practices?