NHIF to charge hefty penalties on late payments
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NHIF kicks off the implementation of a new act that will see employers pay hefty penalties on late payments
NHIF kicks off the implementation of a new act that will see employers pay hefty penalties on late payments.
The NHIF Amendment Act, 2022 became law in January last year, and it was a subject of a legal contest by the employers.
However, Acting Chief Executive Officer Samson Kuhora indicated in a public notice that employers risked paying the penalties if they failed to match contributions of their workers to the Fund on time.
“As per section 18 (1) of the NHIF Act, employers who fail to remit the employees’ monthly standard contributions by the due date shall be liable to pay a penalty equal to the lending rate of interest of the amount of the contribution, as may be published by the Central Bank of Kenya from time to time,” he said on a public notice on penalty on late contributions.
The due date for monthly standard contributions is the 9th day of the following month.
NHIF said the new penalties will be effective starting May 1, and will curb employers from defaulting on the contributions that should be remitted before the date provided in the following month.
In the revised penalties, self-employed contributors to the NHIF will now pay lower penalties should they default on their contributions.
The new penalty rates will see defaulters pay 10 percent of the contributor’s amount. Previously, the penalties were charged at half of the contributor’s amount translating to Sh250 for every month defaulted.
The new rates will now see those contributing Sh500 pay Sh50 as penalties should they default, a decrease of Sh200 from the previous amount.
“As per Section 19(2) of the NHIF Act, self-employed contributors who fail to pay their monthly contributions by the day when the monthly contributions are due shall be liable to pay equal to 10 percent of the amount of the contribution,” Kuhora said.
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This is after the NHIF Act of 1998 was amended on January 2022 highlighting the revised penalty rates on late contributions by members.
In November last year, the court put brakes on the implementation of the law and also barred the Health Cabinet Secretary from gazetting any regulations that would operationalize the amended law. This immediately halted the NHIF’s plans to collect an estimated Sh31 billion from employers.
Businesses seeking to be exempted from this requirement are required to provide a private medical scheme with benefits equal to or better than those offered by the NHIF.
Employers moved to court seeking revocation of the clause saying that it would increase operational costs and affect the employment of new workers.
In the initial charges captured in the NHIF Act 1998, the self-employed penalty was five (5) times the late contribution, and for employers, two (2) times of the late contribution.
However, for self-employed the NHIF Board had reduced the self-employed penalty to 50 percent of the late contribution.
Employers and individual self-employed members who remit contributions after the due date have been paying ensuing penalties.
“The reason for the amendment is because the previous penalty was unrealistically high at 2 times and 5 times for employers and self-employed members respectively,” according to an insider.
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