President William Ruto, in his proposed Finance Bill 2023, indicated that all salaried Kenyans would be subjected to a mandatory 3 per cent deduction from their payslips.
The deduction would go towards Housing Fund Levy under the President’s Affordable Housing Programme.
A section of Kenyans led by politicians and civil servants opposed the move arguing that loans and other statutory deductions ate up all their earnings.
Led by Mumias East MP Peter Salasya, the affected individuals noted that it would be impossible to impose the deduction since they received nothing at the end of the month.
"I have taken loans (which are eating up my entire salary). What will you cut? I only get zero. Do you want to take my property too?” Wondered Salasya.
Kenyans.co.ke spoke to economist Ken Gichinga on what will happen to Kenyans who had their entire payslips committed to loans.
He explained that it would be impossible for any salaried Kenyan to not contribute to the Housing Levy noting that those who had their payslips committed to servicing loans would automatically end up defaulting.
“If the proposal is passed and made into law, then the deduction for salaried employees will happen even before the salary hits the account,” he pointed out.
Gichinga revealed that the flaw would see many Kenyans negatively listed on Credit Reference Bureau (CRB).
“When a Sacco or bank check-off loan is being processed, it will not be able to find enough money to deduct.
“Therefore, the individual will be considered to have defaulted on the loan,” he told Kenyans.co.ke.
Due to that, Gichinga explained that if members of Parliament passed the bill without amendments, it would be contested in court.
On Monday, May 29, National Assembly Majority Whip Sylvanus Osoro revealed that the August would consider making amendments to the bill.
“The Housing Bill is a well-thought-out idea but we are still collecting views from all stakeholders.
“The bill is not cast in stone, so we will amend it based on the proposals raised by stakeholders,” he assured Kenyans.
According to labour laws on statutory deductions, Section 19(1) of the Employment Act state that it is impossible for an employee to opt out of them.
"You are allowed by the law to deduct from your employee’s salary, any amount as a contribution to any fund or scheme approved by the commissioner for labor to which the employee has agreed to contribute to," the law guides.
The Housing Levy will be a statutory deduction together with Income Tax, The National Health Insurance Fund (NHIF), The National Social Security Fund (NSSF), Higher Education Loans Board (HELB) amongst others.
