LSK warns employers against NSSF deductions under contested law

Law Society of Kenya (LSK) President Charles Kanjama has warned employers that continuing to deduct National Social Security Fund (NSSF) contributions under the disputed NSSF Act, 2013, could expose them to legal claims from employees, insisting that payroll deductions must strictly follow existing court decisions.

In a statement on Saturday, Kanjama said employers risk liability if they continue applying contribution rates under a law whose constitutionality remains under challenge in court.

The NSSF Act, 2013, replaced the previous contribution model, where both employers and employees contributed about Sh200 monthly, with a salary-based system that calculates contributions as a percentage of earnings under a tiered structure.

The law has been the subject of a lengthy legal dispute that has moved through several courts. The matter was initially heard by the Employment and Labour Relations Court, which declared the Act unconstitutional. The case later proceeded to the Court of Appeal, which issued various rulings allowing implementation of the law at different stages.

The dispute eventually reached the Supreme Court, which did not make a final determination on the constitutionality of the law but instead referred key issues back to the Court of Appeal for further consideration.

Most recently, on May 29, 2026, the Court of Appeal declined to temporarily suspend the Employment and Labour Relations Court's 2022 ruling that declared the NSSF Act, 2013, unconstitutional. The judges found that the applicants had not met the legal requirements for a stay of execution pending appeal.

The latest remarks come amid differing interpretations by institutions on how employers should comply with NSSF contribution requirements while the appeal remains unresolved.

According to Kanjama, employers are obligated to follow existing court orders and cannot independently decide to continue deductions under a law that has already been declared unconstitutional.

He argued that where a law has been invalidated by the courts, employers should either revert to the previous legal framework or seek express approval from employees before making deductions that exceed the legally permitted amount.

“It is not open to employers to unilaterally decide to apply rates under a law that has been declared unconstitutional,” Kanjama stated, insisting that compliance must follow court determinations.

He further cautioned that employers who make deductions without legal backing, contractual provisions, collective bargaining agreements, or employee consent could be compelled to refund the money.

“For clarity, any employer who makes unlawful deductions on an employee’s payslip is liable to the employee under both law and contract for the deducted amount,” he said, adding that only statutory deductions or those arising from court orders are enforceable without consent.

Kanjama was responding to guidance reportedly issued by the Federation of Kenya Employers (FKE), which advised employers to continue deducting and remitting contributions based on the NSSF Act, 2013, while the case remains before the Court of Appeal.

"FKE advises members that since the matter has not been conclusively determined in the Court of Appeal, it would be prudent for them to continue deducting and remitting the new rates prescribed by the NSSF Act, 2013," the statement said.

FKE argued that the ongoing legal uncertainty had placed employers in a difficult position, forcing them to choose between the former flat-rate contribution system and the higher tiered structure introduced by the 2013 law.

The employers' body also maintained that continuing deductions under the contested framework would help preserve workers' retirement savings and prevent disruptions to payroll systems as the courts continue to handle the matter.

However, Kanjama rejected that position and maintained that employers should return to the previous contribution rates unless directed otherwise by the courts.

"Employers must revert to the old rates unless they secure their employees' consent, or they set aside the prevailing court order," he stated.