1. What is changing?
Starting February 2026, NSSF deductions will rise from the current maximum of Kshs. 4,320/= to Kshs. 6,480/= for employees, which must be matched by the employer. This translates to 6% of the employee’s monthly gross salary, with a similar amount paid by the employer thereby bringing the total contribution to the Fund to 12%.
The new rates will apply to salaries ranging from Kshs. 9,000 up to Kshs. 108,000, which will be a significant increase from the current range of Kshs. 8,000 to Kshs. 72,000. These changes will take effect from the February 2026 payroll.
2. How will this impact Tier I and Tier II contributions?
NSSF contributions are split into two categories: Tier I and Tier II contributions.
· Tier I contributions must be paid to the NSSF Pension Fund. These contributions are based on the lower earnings limit, which will rise to Ksh. 9,000 up from the current Ksh. 8,000. Employees will therefore contribute Ksh. 540/= which will be matched by the employer.
· Tier II contributions are based on the upper earnings limit which is rising to Kshs. 108,000 up from the current Ksh. 72,000. Employees will contribute 6% of the difference between the upper and lower limits, amounting to a maximum of Ksh. 5,940/=, matched by the employer.
· Unlike Tier I contributions, Tier II contributions can be paid to a private pension scheme approved by the Retirement Benefits Authority.
ALL contributions must be remitted by the 9th day of every month. A penalty of 5% of the total contributions is charged for each month or part of a month that the payment is late.
What does this mean for Employers and Employees?
For employers, this means that payroll costs will increase and internal payroll systems must be updated to ensure compliance. Employers will also need to factor in these changes when budgeting, negotiating compensation packages, or reviewing employee benefit structures. Additionally, the ability to contract out Tier II contributions creates room to explore private pension schemes that may offer administrative or investment advantages.
For employees, while net pay will reduce due to increased deductions, the long-term effect is improved retirement savings and greater pension security. The higher contribution amounts mean employees are likely to enjoy enhanced retirement benefits in the future.
At HRFLEEK, we are committed to guiding employers through this transition, from updating payroll systems to reviewing compliance and assessing Tier II contracting-out opportunities. Please feel free to reach out to us for any clarification or assistance.
Contact Person & Contributor: Isabel Gakuo – Employment Law Associate
Email: igakuo@hrfleek.com
For more information, please reach out to:
HRFLEEK Services Limited
I&M Bank House, 3rd Floor, 2nd Ngong Avenue
Tel: 0117 646 059
Email: info@hrfleek.com
Website: https://hrfleek.com/consultation