Kenya’s New Laws on Pension Reform and Registration Requirements

Pension Reform

Employees will have less access to their pension fund upon termination of employment as a result of legislation aimed at ensuring employees have enough money in their funds when they reach retirement age. This was done through an amendment to the Retirement Benefits (Occupational Retirement Benefits Schemes) Regulations, 2000 promulgated under the Retirement Benefits Act, 1997.

Previously, upon discharge, employees were entitled to their own contributions, 50 percent of their employer’s contributions, and any investment income that accrued after those contributions.

Under the amendment, which was passed in June 2019, employees will no longer be entitled to their employer’s contributions or any investment income until they have reached the retirement age, which is specified in the pension scheme rules or employers’ human resources policies for employees in the private sector. The mandatory retirement age for public servants is 60 years old.

The amendment has sparked moral and financial debates. The Retirement Benefits Authority of Kenya has welcomed the amendment, as it seeks to ensure that employees nearing retirement age have sufficient retirement savings. In addition to consulting employees on these changes, employers may want to ensure that company pension scheme rules and trust deeds are updated in accordance with the amendment.

Employee Registration

The Kenyan government has taken steps to improve compliance with employee registration rules. According to the Employment Act, 2007, employers with more than 25 employees are required to maintain a roster of their employees with such details as full name, age, sex, occupation, date of hire, nationality, and level of education. Employers are required to file returns containing this information to the Director of Employment for each calendar year by January 31 of the following year.

In an attempt to enforce compliance with these provisions, on June 26, 2019, the Kenya National Employment Authority (NEA), a separate entity from the Director of Employment, issued a notice requiring employers to submit returns for calendar year 2018 by July 8, 2019.

Employers that have not registered with the NEA are required to do so in order to file returns. Employers are now required to file returns, as failure to do so will result in a fine of up to KES 100,000 (approximately USD 1,000) and/or a six-month jail term.

Employers with 25 or more employees should also be aware of additional notification requirements under the Employment Act, including notifying the Director of Employment of any vacancy occurring in the organization, when a vacant post is filled or a post has been abolished, and of the termination of every employment and of each layoff within two weeks.

Comment

The notification requirements, though onerous, aim to help Kenya deal with high unemployment levels, particularly among its youth. However, it has yet to be determined how details of vacancies will be publicized to potential job seekers or how the NEA will collaborate with employment agencies.

Written by Sonal Sejpal, Tabitha Joy Raore, and Maureen Kirui of Anjarwalla & Khanna and Roger James of Ogletree Deakins

© 2019 Anjarwalla & Khanna and Ogletree, Deakins, Nash, Smoak & Stewart, P.C.