NSSF benefits low-income workers most

Nov 17, 2009

RECENTLY, it was reported in the press that university dons during the vice-chancellor’s forum requested the Government to exempt part-time lecturers from saving with the National Social Security Fund (NSSF). Their argument was that they earn small sala

By Olive Lumonya

RECENTLY, it was reported in the press that university dons during the vice-chancellor’s forum requested the Government to exempt part-time lecturers from saving with the National Social Security Fund (NSSF). Their argument was that they earn small salaries and the deduction to NSSF leaves them with almost nothing.

It is understandable that some members of the public and contributors have been frustrated about the way money and investments have been handled in the Fund in the last several years.

However, in the lecturer’s case I will explain the issues raised and help all of us understand the role of the NSSF. First and foremost, the contribution is as stipulated in the NSSF ACT CAP 222 of 1985. But the Act not withstanding, it is important to appreciate the benefits of savings with NSSF more so for the low earning workers.

I will first of all explain how the contributions to NSSF are arrived at. The employees (who are the part-time lecturers in this case) will contribute 5% of their total earnings and the employer, who is the university, will contribute 10% to the lecturer’s savings. This makes a contribution of 15% for the lecturer.

For example, if the lecturer was earning sh200,000 per month, 5% would be deducted from his salary which is sh10,000 leaving the lecturer with sh190,000. The employer will contribute 10% of the lecturer’s salary which is sh20,000. This makes the total contribution sh30,000. This is the contribution that is made to NSSF and it is the member’s saving which they claim when they qualify. NSSF adds interest before paying it out to the members.

The suggestion of exempting part-time employees would, therefore, be another way of depriving these workers of a saving that will be beneficial to them and their dependants in future. Contributing to NSSF is one way of assisting these workers save and it is not a tax.

My experience is that many employers will resist contributing to NSSF as and when they are still decision makers in the particular institutions but when they retire or are relieved of their duties, the first place they go to is NSSF to check if they have any savings.

Many of these did not even accept to contribute but once out, they want their former institutions to contribute at least the 10%. This is not possible because the Act states that you contribute 5% and the employer 10% and that is when it is legally binding.

Many employers in the past were cheating their employees and not contributing for them purely because they never wanted to pay the employer contribution of 10%. Many of them avoided registering their workers and even those who registered only contributed the workers contribution of 5%. Some actually made it a condition at the time of employment.

Currently, NSSF has over 400,000 members and on average, receives 800 benefit claims per month and pays out about sh3.5b per month in form of benefits. Last financial year, 2008/09, a total of sh36.2b was paid out to 7,861 workers.

There are five ways in which a member can qualify to claim their savings and these include: Age benefit which is paid to members who are 55 years of age even though still employed or members who are 50 years, but out of employment.

Withdrawal benefit is yet another way in which one can claim their benefits. This applies when one joins exempted employment like the Government, Police and teaching, among others.

In the case of the part-time lecturers, if they join any government institution which recognises them as pensioned workers, then they have a right to claim for their contributions, it does not matter what age they are.

Death is unavoidable and it is important that we are always prepared for this eventuality. Within the benefits, there is the survivor’s benefit which is paid to the family when a member dies.

The expatriate community too has benefited from the contribution and they are paid their full benefits when leaving the country for good, which involves cancellation of work permits. It is referred to as Emigration Grant and Ugandans who permanently immigrate to other countries. Invalidity benefit is paid to members who are incapacitated by illness and are no longer gainfully employed or affected by accidents as long as the doctor confirms so.

Contributing members who qualify under the above categories have been claiming their benefits and they have been paid.

It is unfortunate that such a recommendation was made and yet clearly it would be another way of depriving the workers of their savings. The workers have become more enlightened to-date including those with very low paying jobs and many have approached us and reported their employers who are defaulting.

It would be absurd for any employer to avoid contributing for their workers. In fact those who get “very little income” are more vulnerable, the very reason institutions should be willing to contribute for them in order to secure their future.

With increased sensitisation, this has changed and it is the workers now pushing their employers to meet their social security obligation.

On the other hand, NSSF has improved greatly in service delivery, processing of member benefits which is now faster. Members receive their statements and NSSF is determined to continue improving and will make this savings scheme, the most respected and leading social security provider in East Africa.

The writer works with the National Social Security Fund

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