National Social Security Fund (NSSF) Act Declared Unconstitutional

In a landmark judgement delivered on 19 September 2022, the Employment and Labour Relations Court in Nairobi declared the National Social Security Fund (“NSSF”) Act unconstitutional, null and void on various fronts.

The Court faulted the process of enactment of the Act, stating that since it had implications on county finances, the NSSF Bill should have been tabled before the Senate for deliberation before enactment, which had not been done.

One of the contentious provisions of the nullified Act made it mandatory for employers to register with the fund before accessing public services. This, the Court held, was discriminatory and a violation of the Constitution, and therefore illegal.

In the Court’s view, the NSSF Act had in essence made the fund a monopoly in the provision of pension and social services in the country, against the provisions of the Competition Act, giving it an unfair advantage over other pension scheme providers. On this basis, the Court found that employers and employees who were members of alternative pension schemes were not obligated to make mandatory contributions to the fund.

Consequently, the Court barred the NSSF Board of Trustees and the Cabinet Secretary for Labour and Social Security Services from collecting contributions from employers and employees in the country entirely. Simultaneously, the NSSF Board of Trustees was fettered from collecting contributions from employers and employees who were members of alternative pension schemes unless such members had voluntarily opted into the fund.

With this declaration, Parliament will have to design an entirely new law, carefully considering the issues raised in the recent judgement to prevent the new law from suffering the same fate. In the meantime, employers and employees will no longer be mandatorily required to make contributions to the fund. 

This alert serves as general guidance and is not intended to constitute specific legal advice. For legal advice with respect to this alert, please contact our Partners, Grace.Kinyanjui@CMS-DI.com,  George.Muchiri@CMS-DI.com, and Collette.Akwana@CMS-DI.com.

*Contributors
Zeus Ombeva – Senior Associate, Lucy Mwaura – Associate