Starting from May 1, Kenyan companies will face an interest penalty equivalent to the Central Bank of Kenya’s lending rate if they fail to remit or match their employees’ contributions to the National Health Insurance Fund (NHIF) on time. This new penalty is a result of the NHIF (Amendment) Act, 2022 that took effect in January last year but had been held up in court by companies challenging the requirement and its penalties.
The penalty rate is 9.5%, which is currently the base lending rate set by the Central Bank of Kenya. The NHIF is enforcing the new penalty to encourage prompt payment of contributions by employers and to stop them from defaulting on remittances that should be made before the 9th day of the following month.
Samson Kuhora, the acting NHIF CEO, has urged companies to make their contributions on time and avoid the interest penalty. The NHIF Act No. 9 of 1998 has been revised and now specifies the new penalty rate on late contributions, with the effective date for the penalty rate being May 1, 2023.
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The NHIF has also clarified that employers who want to be exempt from this requirement must provide a private medical scheme with benefits that are equal to or better than those offered by the NHIF.
The NHIF provides health insurance services to Kenyan citizens, and members must make monthly contributions to the fund to access its benefits. The NHIF has been struggling with high rates of default by some of its members, and this new penalty is expected to act as a deterrent to defaulting on payments. Self-employed contributors who fail to remit their monthly contributions of Ksh. 500 by the 9th of the following month will also pay a fine equivalent to 10% of the rate. The NHIF has warned that it will take legal action against those who persistently default.
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