Teachers face 3% housing fund deduction in May salaries

Teachers face 3% housing fund deduction in May salaries

Teachers together with civil servants face looming housing fund deduction in this months salaries after amendment of the 2007 Employment Act to allow immediate deduction from employees salaries.

Clause 76 reads “76. The Employment Act, 2007 is amended by inserting the following new section immediately after section 31A-

31B 1) An employer shall pay to the National Housing Development Fund established under section 7 of the Housing Act, in respect of each employee-

(a) the employers contribution at three per centum of the employees monthly basic salary; and

(b) the employees contribution at three per centum of the employees monthly basic salary provided that the sum of the employer and employee contributions shall not exceed five thousand shillings a month.”

In the Finance Bill, 2023, which carries tax proposals for the 2023/24 financial year, the government is seeking more revenue through deductions.

President William Ruto had said the contribution will help teachers and civil servants purchase houses built under the Affordable Housing project.

He said that Kenyans will contribute the funds on a monthly basis.

“To enable many Kenyans buy houses under the affordable housing project, we have a housing fund to which we want every Kenyan to contribute 3 percent of their income. If you earn Sh10, 000, 3 percent is Sh300  every month goes towards the fund,” Ruto said. 

“Every employee who saves 3 percent with the Housing Fund, the law will require their employer to also save 3 per cent,” Ruto  said. 

The President noted that almost 700,000 public servants in the country will be the first to start saving under the Housing Fund. 

” Every civil servant who will save 3 per cent from their income will get 3 per cent of their salary from the government every month so that we can create a fund that will assist the people of Kenya to acquire homes,” Ruto said. 

The President also said currently, there are only 40,000 mortgages in the country yet there are supposed to be up to 2 million mortgages to measure up to the size of the economy. 

Ruto said many Kenyans are living in informal settlements and need an upgrade on the quality of houses they live in.  

Ruto targets to build up to 100,000 houses in Nairobi as part of his affordable housing project.

Kenyans earning at least Sh500,000 monthly also face deeper tax chops as the Finance Bill proposes to raise their income tax from 30 per cent to 35 per cent.

This will see a worker earning Sh500,000, pay over Sh200,000 in tax. The proposal comes at a time when President Ruto has been hard on the wealthy, even hinting at introducing a wealth tax.

But the pain will not befall only the salaried as Treasury also proposes to raid Kenya’s digital content creators, an industry that has attracted the youth, offering an alternative to a population category hard hit by unemployment.

The Bill proposes a 15 per cent tax on payments relating to digital content monetisation, as a withholding tax. The tax will have huge implications on thousands of youth who currently earn a living from the digital space and comes when the government has been aggressively driving investment in internet connectivity and technology to attract the jobless.

“In respect of payments relating to digital content monetisation, 15 per cent (withholding tax),” the Bill proposes in relation to the sector.

Treasury has also proposed to raise turnover tax for businesses with revenues from as low as Sh500,000, from 1 per cent to 3 per cent, a move that will hit more businesses classified under small and medium-sized enterprises (SMEs), which may not be stable.


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