Thousands of employees this month risked breaching the legal requirement that demands they pocket at least a third of their salary, following a deduction of 2.75 percent of gross pay towards the Social Health Insurance Fund (SHIF).
The employees paid higher rates to the SHIF, which replaced the National Health Insurance Fund (NHIF). Previously, workers have been parting with between Sh150 and 1700 towards NHIF.
The switch to SHIF saw those earning Sh100,000 part with an additional Sh1,050 while those earning Sh200,000 pay an extra Sh3,800.
According to Kenya National Bureau of Statistics (KNBS), 1.28 million Kenyans (42 percent), in the formal employment earned less than Sh50,000 while 1.735 million (58 percent) earned Sh50,000 and above. Notably, the bulk of those earning 100,000 and above was 371,894 Kenyans.
Contributions to SHIF hit the most, those employees whose salaries ranged between Sh100,000 to Sh1 million, as they parted with an additional Sh1050 to Sh25,800 for the state backed insurance-accounting for the largest share of deduction after Paye.
Additional deductions for employees on Sh450,000 was about Sh10,675, while those on Sh800,000 and Sh1 million had an extra obligation of Sh20,300 and Sh25,800 respectively.
This translated to compulsory contributions to the state, rising to about 21.5 percent for those earning Sh50,000,30 percent for Sh150,000 salary and surpassing a third for those earning above Sh550,000.
This SHIF deduction accompanied the revised National Social Security Fund (NSSF) contributions from Sh200 up to Sh2,160 and the 1.5 percent housing levy deduction on gross pay, which have substantially minimised the disposable income for many employees, more so those earning above Sh100,000 in the formal sector.
While employees in the formal sector, particularly those earning above Sh100,000 have borne and felt the SHIF burden through hefty pay cuts, it is yet unclear on the means testing to identify households that need financial support.
Thus, burden of SHIF appears unparallel, falling heavily on a certain group of employees in the formal sector.
