NSSF law starts biting employers
All formal entities and employers have up to the end of next month to register and start remitting contributions to the National Social Security Fund (NSSF) on behalf of their employees, or risk tougher penalties.
The changes announced by the Fund leadership yesterday aim to effect provisions of the NSSF Amendment Act, 2022, which requires all employees in specified categories to be enrolled for the pension Fund contributions.
Section 7(2) of the amended Act provides that “every employer, irrespective of the number of employees, shall register with the Fund as a contributing employer and shall make regular contributions for his or her employees in accordance with this Act and regulations made under this Act.”
In the old law, an employer would register its employees for NSSF membership and contribution if its employees numbered at least five or more.
Proponents argued during last year’s enactment that mandatory enlistment of formal and informal sector workers, including freedom for individuals to become voluntary contributors, would help expand social security coverage and bolster the Fund’s financials.
Implementation of the provisions was, however, overshadowed for months by the dispute triggered by claims that Gender minister Betty Amongi, the political co-supervisor of NSSF, asked for Shs6b for execution of a mandate that resides with the Fund management.
In defence, including before a parliamentary inquiry, the minister argued that she had legal backing under Section 29(3) of the NSSF Act to vary the Fund’s budget and her proposal to reallocate Shs6b from the operational budget was to engage more stakeholders to implement expanded coverage since Shs257b potential NSSF contributions remained uncollected under the Fund’s leadership.
That battle, among other allegations and counter-claims, imperiled the prospects of Mr Richard Byarugaba’s reappointment as NSSF managing director, leaving renamed deputy managing director Patrick Ayota to take charge of the Shs17.8 trillion Fund as its acting chief executive.
Addressing journalists in Kampala yesterday, Mr Ayota said “given [that] the law came into force a year ago, employers should have registered and started remitting social security contributions for their employees effective January 7, 2022. However, only 3,200 have registered with the Fund”.
The revised law redefines an “employer” to include the government, any registered business, duly registered partnerships, trustees and managers and sub-contractor.
“We have noted that a number of employers are still not registered with the Fund. We are happy to announce a 30-day window effective [yesterday] for all employers irrespective of the number of employers. Once this window closes, any registration will attract a penalty,” he said.
The revised NSSF law imposes a penalty of 10 percent of the accrued arrears for non-compliance, which compounds every month.
Mr Geoffrey Sajjabi, the chief commercial officer, in a red flag for non-compliant employers under the old law, noted that “if you have been in existence, and you have been employing more than five people, we look back to when you started”.
“For those with less than five [employees], we are only looking from January 2022 [when the amended act was signed],” he said in an outline of varied potential liability periods.
The Fund said it had emailed 150,000 companies that are not yet registered with it, reminding them to register within 30 days.
“We can agree on the repayment plan of the arrears, without the penalty. But if you do not use this time and we are forced to use other ways to bring you on board, in addition to the arrears, we will also penalise you,” Mr Sajjabi said, adding, “Whether you are registered or not, the day we eventually get you, that penalty will apply.”
Noting the difficult economic environment, Mr Sajjabi said employers with a valid reason for inability to comply immediately can notify the Fund to work out a favourable payment plan.
NSSF plans to double its current membership of 1.2 million over the next five years and increase contributions to a projected Shs700b.
Official records show that 3,200 employers and others from the informal sector have registered since the new law took effect last year, raking in an additional Shs6b from new members between June 2022 and February this year.
Slightly over half of the remittances were by employers with less than five staff.
Even with a target on growing the Fund membership, non-compliance remains, officials said.
NSSF presently has 2.5 million registered members, out of which 1.5 million have a running balance and only 700,000 are active contributors.
Responding to queries of how the Fund will ensure registered members contribute, Mr Ayota said “first you register them, then they contribute.”
The workers’ Fund has put in place a whistleblowing option where employees can report non-compliant entities and field inspectors,, whose mandate is to enforce compliance.
About contributor’s enrolment campaign
Dubbed the “Now You Can” employer registration campaign, employers can register online via the NSSF App, or physically at any Fund branch. Those with a large number of workers can invite the Fund to their premises. Individuals are required to have a National Identification Number (NIN) and telephone number.
Mr John Walugembe, the executive director of the Federation of Small and Medium Sized Enterprises, asked NSSF to intensify awareness creation on the campaign and if possible, extend the 30-day window to enable all entities comply.
The new campaign comes in the wake of a Parliament inquest into alleged wide-ranging mismanagement and corruption at the Fund, with lawmakers in their final report raising up to 28 for the Fund Board and executives to be sacked.
All have said they are going nowhere unless their line ministers or the President decides otherwise because recommendations by the Legislature are advisory, not binding.
At yesterday’s press conference, acting NSSF managing director Patrick Ayota assured members that their savings are safe despite the turbulence.
“It is what you call a going-on concern. When you come to a stumbling block, you either jump over it, go over it, duck under it, but you continue,” he said cryptically. “Your Fund has continued to grow,” he added.