Double deductions. The national government through the ministry of land, public works, housing and urban development has announced a double deduction of the compulsory housing levy. The payslips of government employees are therefore expected to see a reduction this month.
This decision goes together with retroactive application of the levy from July 1, introducing a noteworthy change to the existing landscape of the controversial housing levy.
The housing levy demands that all employees give 1.5% of their monthly pay towards the fund. Employers are also required to contribute towards the levy for each employees they have.
At a time when employers start the application of the compulsory deductions, employees are expecting a three percent deduction. This is because the housing levy was not deducted during the month of July. The extra deduction will therefore cover the deductions that are backdated.
According to a public notice, employees are supposed to pay 1.5% of their salary towards the levy. Employers are also required to pay the same amount as their employees towards the levy. This is in line with the Finance Act 2023.
These changes will therefore lead to a high financial effect for all government employees. For example, an employee earning sh 50,000 will be required to give sh 1,500 towards this deduction. This means that they will experience high deductions since this only goes to the housing levy.
Employees earning sh 100,000 are also expecting a tangible financial effect this month. This is because they will be required to pay sh 3,000 towards the housing levy.
According to the government, the aim of this funds is to construct affordable houses for individuals with low income.
The government announced that they are doing this because they want to avoid a scenario where the country over depends on other states.
The housing levy was initially set at 3%. It was however reduced to 1.5% because it faced opposition from the public.
The law requires that all employers allocate monthly salaries for every worker within nine working days after the conclusion of the respective month.
In addition, any employee who will violate this rule will face a penalty. The penalty will be equivalent to 2% of the funds that have not been paid for each month the rule is broken.
Double deductions on employees’ August payslip.