Bill proposing 2.75% gross pay deduction to be tabled next week

Bill proposing 2.75% gross pay deduction to be tabled next week

Teachers, civil servants and other salaried Kenyans will be subjected to a deduction of 2.75 percent of their gross pay towards a new health insurance fund.

President William Ruto plans to make it mandatory for every household in Kenya to contribute 2.75 percent of its income to fund a new social healthcare fund.

A new bill, the Social Health Insurance Bill 2023, which will be presented to Parliament next week will also make it mandatory for all Kenyans to be members of a new Social Health Insurance scheme, which will replace the current National Health Insurance Fund (NHIF), to enjoy government services.

To fund the grand health scheme, the State plans to increase deductions from the current range of Sh150 to Sh1,700 to a flat rate calculated at 2.75 percent of gross monthly earnings.

The looming deductions will further cut the take-home income for Kenyan workers whose monthly earnings have been hit by the housing tax and increased contributions to the National Social Security Fund (NSSF).

The State will, through the Pay As You Earn (PAYE), NSSF, housing levy and health care contribution, take about Sh10,264 or 20.5 percent from those earning Sh50,000 gross pay, up from the current Sh8,460.

Workers earning Sh100,000 will give up Sh27,389 or 27.4 percent, with the pain deepening for those higher salaries.

The new deduction is planned to start on 1st October 2023 with a raft of other taxes enshrined in the Finance Act 2023 and already taking effect.

The Finance Act 2023 had some taxes planned to start in July others on 1st September and last on 1st January 2024.

The deductions highlight the pain of workers in funding President Ruto’s universal health coverage (UHC), affordable housing and enhanced pension plans in addition to other budgetary needs.

Under the State-backed Social Health Insurance Bill, 2023, UHC will be modelled on three separate funds—one for preventive and primary health care, another for primary referrals and a third covering treatment of chronic diseases.

“These funds are to be managed by a single board and secretariat, based on the proposed 2.75 percent deductions on household income from both formal and informal sectors,” State House spokesperson Hussein Mohammed said.

Mr Mohammed said that the funds are part of the plan by the President to deliver the UHC promise.

The ruling Kenya Kwanza coalition’s manifesto pledged to employ and initiate payments for community health promoters and integrate preventive and promotive services.

Mr Mohammed said the Primary Health Care Bill 2023 establishes a framework, for the delivery of, access to and management of primary health care.

The Bill provides for the re-organisation of service delivery at the primary health care levels, including dispensaries and health centres.

“It establishes the framework for the 100,000 community health promoters to be commissioned by the President in October 2023 and outlines the services they will offer when they visit households,” he said.

“This means Kenyans seeking services at these levels can walk in and walk out without incurring any Bill.”

But to actualise the dream, the government will line up regulations that will make membership in the new health care compulsory in a bid to rope in the 80 percent of Kenyans in the informal sector to contribute to the scheme.

Those without proof of up-to-date contributions will be denied State services under the regulations that will bring social health care membership to the same league as Kenya Revenue Authority (KRA) personal identification numbers (PINs).

This means that non-contributors to the health care scheme will be barred from making critical transactions such as registration of land titles, approval of development plans, transfer and licensing of motor vehicles and access to the Hustler Fund.

The State sees enhanced contributions as a way of giving a lifeline to the UHC but will have to overcome the headache of dormant membership that has over the years hurt the NHIF.

The public health insurer collected premiums worth Sh78.84 billion in the year to June 2022 against the targeted Sh90.57 billion and has defaulted on paying hospitals for services offered.

In May this year, hospitals started turning away patients seeking treatment on the NHIF cover over unpaid claims of at least Sh12 billion, lifting the lid on the scheme’s dire financial state.

The hospitals claimed that the arrears had been accumulating since last year.

Higher health care contributions, combined with the new housing levy, a new band of PAYE of 35 percent, and NSSF will see Kenyans earning over Sh200,000 a month give the State at least 30.8 percent of their earnings from the current 27 percent.

A Sh200,000 payslip will cede Sh61,639 from the current Sh53,959, being an additional Sh7,680 while workers earning Sh500,000 face deductions of Sh164,389 (33 percent), up from Sh143,959.

A Sh800,000 earner will give the State Sh276,106 or 34.5 percent, being an additional Sh42,147.

National Assembly Leader of Majority Kimani Ichung’wah is expected to table the bill in Parliament for debate and passage into law.

Others are Primary Healthcare Bill, 2023, Digital Health Bill, 2023 and the Facility Improvement Financing Bill, 2023.

error: Content is protected !!