The Federation of Kenya Employers (FKE) has declined to withdraw a case challenging the deduction of a 1.5 percent housing levy from workers’ pay until President Uhuru Kenyatta’s directive that the monthly contribution be made voluntary is effected in law.
The employers’ lobby group had last year sued the government over the Finance Act 2018, which was compelling workers to contribute 1.5 percent of their basic salary to the fund, with a similar amount matched by employers.
FKE chief executive Jacqueline Mugo on Monday said that despite President Kenyatta’s Jamhuri Day directive last Thursday, the organisation would not rush to withdraw the case.
“We wish to advise our members that the case we filed over the Housing Fund Levy that is pending in court will only be withdrawn once the amendment to the law is effected to make the contributions voluntary as directed,” Ms Mugo said in a statement.
The case was filed early last year, but has been postponed several times with the latest being the consolidation of all the 11 cases filed by different parties opposed to the levy. Other parties, including the Central Organisation of Trade Unions (Cotu), the Trade Union Congress of Kenya and the Consumer Federation of Kenya (Cofek), had also sued the government.
Cofek secretary-general Stephen Mutoro concurred with FKE, saying the issues before the court went beyond voluntary contribution. “There are other more critical issues such as certainty of securing a unit after being enrolled. Either the court shall make a determination or if government is ready for out-of-court settlement, some undertaking needs to be made,” said Mr Mutoro.
Mr Kenyatta had directed the Treasury and the Ministry of Housing to make the necessary changes to the Housing Fund Levy and table them before Parliament for adoption next year. The levy has been a key plank of the President’s ambitious Big Four Agenda to provide 500,000 affordable houses by 2022, but court cases have stalled its implementation. Contributors were to use their savings as a deposit or security when negotiating for mortgages to buy the affordable houses, while low-income buyers were to rely on the contributions to negotiate tenant purchase schemes that would eventually leave them as owners.
FKE has consistently maintained that imposition of the mandatory levy on companies and workers would lead to more pressure on employers and result in difficulty in negotiations, leading to job cuts.
“The federation urges the National Treasury and Parliament to speed up the process of amending the law to make the fund voluntary as directed by the President,” said Ms Mugo.
She said FKE members would help in collection of the levy from any worker that voluntarily wants to contribute to the fund.
The 1.5 percent levy on salaries was expected to generate about Sh57 billion a year, from about 2.5 million salaried Kenyans, with additional revenue expected to come from voluntary contributors, who will be putting in a minimum of Sh200 into the fund per month.
Under the plan, low-cost housing was designated for Kenyans earning between Sh15,000 and Sh49,999 per month while those earning below Sh15,000 are classified under the social housing plan. The mortgage plan — under the mortgage gap housing bracket — was designated for those earning between Sh50,000 and Sh100,000 per month. Employees were to get back their money if they were unable to continue with their contributions due to disability, or if they were not allocated or obtained a house in 15 years.