How August payslip will be impacted by house levy with arrears

How August payslip will be impacted by house levy with arrears

Teachers, civil servants and other employees will have their August payslips shrink with the government set to implement a double deduction of the mandatory housing levy.

In a radical move, the Ministry of Lands, Public Works, Housing and Urban Development has published a public notice backdating the levy to July 1.

Under the controversial affordable housing levy, employees are required to part with 1.5 per cent of their monthly gross pay with their employers matching the same amount.

With the backdating of the contributions, then it means that employees will have their pay reduced by three per cent as employers move to implement the statutory deductions.

“The levy is payable by the employee and employer at a rate of one point five per centum of the employee’s gross monthly salary by the employee, and one point five per centum of the employee’s monthly gross salary by the employer, as outlined in the Finance Act 2023,” read the public notice.

This means that while employees will be giving away 3 per cent of their pay to cover the months of July ad August, employers will also be required to top that up with the same amount.

An employee who earns a monthly gross pay of Sh50,000 will lose Sh1,500 at the end of the month of August to the housing levy alone.

Those earning Sh100,000 will part with Sh3,000 for the months of July and August.

Those earning a monthly gross salary of Sh200,000 will lose a total of Sh6,000 to cover the two months.

The government says the levy, will be used to build affordable houses for low-income people.

The government had reduced the monthly housing levy from three per cent to 1. 5 per cent for employees after a massive public uproar.

“If we feel the pain of the three per cent, it is because we are alive. If we feel the pain of the millions of young people looking for jobs, of seven million Kenyans who live in indignity in slums, then we are human beings,” Ruto said on June 7.

The levy was shifted into tax, which will now be collected by the Kenya Revenue Authority alongside other levies.

Additionally, employees will not transfer their contributions to their spouse or children as was initially proposed before the bill was passed by Parliament.

However, they will be able to receive their contributions in cash after 7 years.

The law requires an employer to set aside the monthly payment for each employee not later than nine working days after the end of the month in which the payments are due.

The amount comprises the employee’s and the employer’s payment.

Any employer who fails to comply with the housing levy provision shall be liable to payment of a penalty equivalent to two per cent of the unpaid funds for every month the same remains unpaid.

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