LAWS RELATING TO REMUNERATION OF WORKERS
10.1 Legal provisions governing employee remuneration (Regulations of wages and conditions of employment act cap 229)
Meaning of remuneration – Refers to the amount paid or to be paid to the employee by the employer in cash clear of any deductions expect authorized deductions (lawful deductions) for example.
- For the purpose of contribution to any provident fund or superannuating scheme
- In respect of actions supplied to an employee which an employer is charged to provide
- Under any provision where law provides that the employer deducts NSSF, NHIF, PAY, cooperatives.
- At the request in writing by the employee for any purpose for which the employer has no benefit
- Ina situation where there’s no council order, the general wages order is assumed to be in effect. Failure to comply is an offence. If an employer fails to pay an employee to whom a wages regulation order remuneration less than the statutory minimum or fails to provide the employment prescribed in that order, he shall be guilty of an offence and liable to a fine not exceeding 400 shillings.
- In case of underpayment the employer can pay the arrears.
Powers of officers – A labour officer or labour inspector shall have power for the performance of his duties
- To require the production of wage sheets or other records of wages kept by an employer and records of payments made to .
- At all reasonable times to enter any premises at which an employer to whom a wages regulation order applies carries on his business including any place need in connection with that business for giving out work.
- To inspect and copy any material part of any list of outworkers kept by an employer
- To examine, either alone, or in presence of any other person the wages of employee and there after sign a declaration of the truth of the matters n respect of which he is so examined
Determination of Wages and Salaries
- Minimum wages and conditions of employment for certain industries are imposed by the Government under the Regulation of Wages and Conditions of Employment Act (Cap 229)
- Employees are entitled to these minimum wages and conditions of employment even if their contacts of employment state otherwise
- Failing to adhere to guidelines on minimum wages and conditions of employment is a criminal offence. Penalty is Ksh 400/= and payment of the amount that is due the employee (difference between minimum wage and the actual wages)
- Employees are entitled to moneys, allowances and benefits earned while in employment, e.g. salary, accrued leave payments, bonuses, retirement benefits, e.t.c.
- Certificates of Service (testimonials) should be given if asked for
- Does not apply for casual workers whose engagement ends at the end of each day
Pay As You Earn (PAYE)
- The Income Tax Act places on employers an obligation to deduct and remit monthly, income tax for resident employees earning above Ksh 10,164/= per month. Employers are required also to tax benefits such as use of company vehicles
- Annual income tax returns should be made by employers for ALL employees whether subject to PAYE or not
10.2: Legal provision governing employee social security (NSSF, NHIF, PENSIONS)
It is mandatory under the industrial law of Kenya for employers to offer social security to employees. This is because employees get sick and need to seek treatment. Their nuclear families also need to be protected and assisted in paying hospital bills through their health insurance fund. In addition, the employee will retire at one time due to different reasons and hence permanent employees need to have a pension scheme or NSSF if they are not permanent.
National Social Security Fund (NSSF)
The national social security fund Act (cap226) establishes the NSSF as a compulsory social security scheme whose objective is to receive contributions for employers and employees as well as make payments to employees when they leave the organization. The employer is expected to contribute fifty percent of the contribution while the employee contributes the other fifty percent. Standard NSSF (currently under review) contribution is Ksh 200 deducted from employee’s salary, with employer contributing an equal amount. Failure to comply is a criminal offence subject to a penalty equal to five per cent of the amount payable and a fine of up to ksh 15,000.
The contributions are intended to benefit an employee. There are five main benefits paid to contributors by NSSF which are: Age benefits, Withdrawal benefits, Invalidity benefits, Survivor’s benefits and Emigration grants. Age benefits are paid to beneficiaries or dependants of deceased members such as their spouses or children but where none of them exist, the parents, brother, sister or dependent relative receive the benefits which may e divided amongst them according to the wishes of the deceased.
Invalidity benefits are paid to nay members who suffer permanent or partial incapacity or mental disability while withdrawal benefits are paid to persons who reach the age of fifty five. Emigration benefits is payable to a member who is moving from Kenya to reside in another country. However such, as an employee cannot be given his benefits if he will ever come back and his money transferred to the host country. All these payments are given by the director of the fund in cheque and are paid in lumpsum.
NSSF applies to all employees whether in public or private sector as long as they become contributors except: people working in universities or colleges which have their own social security schemes, non-civilian employees such as those employed in armed forces; people who do not reside in Kenya; and persons undergoing full time education.
National Hospital Insurance Fund (NHIF)
The NHIF Act (Cap 255) establishes the NHIF, which is an insurance fund, which caters for medical insurance and pays for expenses incurred by a contributor, and his or her spouse and dependant children. From 1990 onwards, all employers are given a legal notice requiring them to deduct NHIF contribution from employee’s salary. Failure to comply is a criminal offence subject to a penalty equal to five times the amount of that contribution.
NHIF is therefore the primary provider of health insurance in Kenya with a mandate to enable all Kenyans to access quality and affordable health services. Membership is mandatory for all Kenyans above 18 years of age.
The benefits package includes comprehensive medical coverage for all diseases(NHIF Act, section 22).This means that NHIF members, whose majority is from the formal sector can be fully treated at the cost to the NHIF without making additional payments.
Pension is the amount of money paid to a retiree who is employed on permanent and pensionable basis. It is paid regularly until the retiree dies. Section 9 and 10 of the employment Act, 2007 specifies that an employee shall be employed under a contract of service which shall include pensions and pension schemes in which the employee is involved. Section 17 of the pensions Act , provides for the payment of pension benefits to dependants upon the death of an employee in service or on retirement on condition that the employee has worked for ten or more years service.
The pensions Act cap 189,provides for the granting and regulating of pensions, gratuities and other allowances in respect of the public service of officers under the Government of Kenya. In addition there are allowances in respect of the public service of officers under the government of Kenya. In addition there are private retirement benefits schemes governed by the Retirement Benefits Act, 1997(Revised2010). Through which private employers and their employees as members make contributions towards retirement.
The Retirement benefits Act
The retirement Benefit Act was enacted to provide a regulatory framework for the retirement benefits industry. This framework was needed to streamline the industry and gain the required confidence from stakeholders and employees to enable them save more for retirement and contribute towards the national effort of raising the domestic savings rate. The Act created the retirement Benefits Authority to oversee the industry’s management and development in a prudent and appropriate manner.