The government’s plan to effect the deduction of a 1.5 percent housing levy, from all employees in the public and private sectors starting January, has been suspended.
Employment and Labour Relations Court Judge Hellen Wasilwa on Wednesday granted the order following an urgent application by the workers' umbrella body, the Central Organization of Trade Unions (Cotu), which is challenging its legality.
Judge Wasilwa's order will remain in force until Cotu's case is determined.
Section 31A of the Employment Act 2007, amended by the Finance Act 2018, was supposed to take effect on January 1, 2019.
However, Cotu, through lawyer Okweh Achiando, argued that the tax on the basic salaries of employees was against certain constitutional requirements and the Employment Act of 2007.
He said the deductions will have far-reaching implications on the right to fair remuneration and guaranteed labour rights.
“Regulations have not been developed to guide the implementation of the levy. It is also worth noting that there was no public participation in the amendment which was brought through the omnibus Finance Act, 2018,” lawyer Achiando added.
He said the imposition of the levy will force employees into servitude and result in widespread public discontent.
Cotu represents more than 2.5 million workers in the public and private sectors of the economy, who are drawn from its 44 affiliated trade unions.
Secretary-General Francis Atwoli says in court papers said that there is fear that there will be no recovery of deducted salaries, should the tax be declared unconstitutional, a circumstance that he says would amount to a travesty of justice against employees.
He noted that the court could find that section 31A of the Employment Act, as amended, is unconstitutional, after the tax comes into effect.
President Uhuru Kenyatta, on September 21, assented to the Finance Act, 2018, after a lengthy legislative process.
The law contains a 1.5 percent contribution by every employee with a matched contribution from the employer, with a set maximum contribution of Sh5,000 monthly.
It will be the employer’s duty to remit both sets of contributions, by the ninth day of the following month.
The contributions will be channelled to the Housing Fund established under the Housing Act.
Employees will claim contributed funds to finance the purchase of affordable housing if they qualify to do so. If not, the funds may be transferred to a pension scheme, another beneficiary or cashed out after 15 years of contribution or retirement, whichever is earlier.
The judge directed that the court papers be served to the Treasury and Transport ministry Cabinet secretaries and the attorney-general.
The case will be heard on January 21.