Employers face hefty fines for Uhuru housing fund delays

Employers will risk paying hefty penalties for late remittance of monthly staff salary deductions and their own contributions towards the Jubilee government’s cheap housing fund.

Draft regulations indicate that late remittance will attract a five per cent penalty, putting in a tight spot struggling firms that have been delaying workers’ salaries and other statutory deductions such as pension savings due to cash flow challenges.

The Housing Fund Regulations 2018 published last week stipulate that all firms employing at least one worker must register with the fund, deduct and pay the levy on all salaried workers not later than one month after the payment falls due.

“If any contribution...is not paid within one month after the end of the month in which the last day of the contribution period to which it falls, a sum equal to five per cent of the amount of that contribution shall be added to the contribution for each month or part of a month that the amount due remains unpaid,” says the regulations.

This means that employers who run into financial challenges leading to delayed salaries will have to give priority to paying the levy on time at the expense of other monthly obligations or risk incurring penalties which could run into tens of millions of shillings for big companies.

The Federation of Kenya Employers (FKE) said it would make known its position on the regulations, which are still subject to public debate and amendments.

FKE president Mark Obuya on Friday said what is not in doubt is that the levy would increase the cost of doing business.

“We are not opposed to the housing levy but the way it is being introduced. In our view, it has not been well thought out to avoid burdening businesses,” he said.

Many Nairobi Securities Exchange-listed companies have in the recent past failed to pay workers their salaries on time or make statutory deductions due to financial stress. Companies such as Mumias Sugar #ticker:MSC, Uchumi #ticker:UCHM, and ARM Cement #ticker:ARM have all delayed workers’ pay at different times.

Mumias Sugar workers were on streets in September over salary arrears running into months as the miller continues to writhe in debt.

Last year, Uchumi and Nakumatt employees also staged street protest over salary arrears of between three to six months.

Small and medium sized companies have also run into liquidity challenges, sometimes due to late payment from suppliers, leading to delayed salaries.

Regulations say it will be an offence for an employer not to be registered in the fund as this could lead to two years in prison. The housing levy is expected to generate about Sh57 billion a year, from about 2.5 million salaried Kenyans.