In 2023, the Social Health Insurance (SHI) Act was introduced to reform healthcare funding and improve accessibility for all households. With its regulations gazetted on March 8, 2024, the SHI Act brought about specific statutory obligations for employers, especially concerning deductions from employee wages and salaries.
READ ALSO: The Complete HELB Loan Repayment Guide
This guide aims to provide a clear explanation of the recent guidelines set by the Social Health Insurance Authority (SHIA) for employers on how to handle these statutory deductions effectively.
Clarifications on Statutory Deductions on the Gross Salary under the Social Health Insurance (SHI) Act 2023 and Regulations 2024
1. Gazettement of the SHI Regulations
The SHI Act regulations were officially published on March 8, 2024, under Legal Notice No. 49. This step signifies the Act’s formal enforcement, making it binding for employers and employees alike. It sets the foundation for new statutory requirements, particularly for households that rely on salaried employment. Employers must be aware of these published regulations to ensure compliance and fulfill their responsibilities as outlined by the SHIA.
2. Understanding Gross Salary or Wage for SHI Contributions
Under Section 17(1) of the SHI Regulations, households with income derived from salaried employment must contribute a monthly statutory deduction to the Social Health Insurance Fund (SHIF). This deduction rate has been set at 2.75% of the gross salary or wage of each household. Employers are required to ensure this deduction is made accurately and submitted by the ninth day of every month.
The definition of “gross salary or wage” includes more than just the base salary. It also encompasses any regular monthly allowances provided to employees, such as housing, transportation, or other monetary benefits. This broader definition aims to ensure that SHI contributions accurately reflect employees’ earnings, providing a more equitable healthcare funding base.
3. Eligibility for Tax Relief
For contributors to the Social Health Insurance Fund, there is potential eligibility for tax relief. The SHIA encourages contributors to seek insurance relief benefits, which may lessen the financial impact of the monthly SHIF contributions. However, the SHIA advises employers to confirm with the Kenya Revenue Authority (KRA) for further details and compliance on how tax relief can be applied to SHIF contributions. Employers should guide their employees regarding these relief options to maximize the potential benefits.
4. Employer Matching Contributions – Not Required
Unlike some other social insurance programs, the SHI Act does not require employers to match the contributions made by employees. This means that employers are only responsible for deducting the set percentage from employee wages and facilitating timely payment to the SHIF. The decision to avoid employer matching contributions reduces the administrative and financial burden on companies, particularly for small and medium enterprises.
Conclusion
The Social Health Insurance Act represents a significant change in Kenya’s approach to health insurance, aiming to provide more comprehensive healthcare coverage for salaried employees and their families. Employers play a critical role in implementing these changes by ensuring accurate deductions, timely contributions, and assisting employees in accessing potential tax relief benefits.
READ ALSO: The Complete NSSF WhatsApp Chatbot Guide
By adhering to these regulations, employers can help enhance the healthcare system and contribute to a healthier workforce. For further guidance, employers should consult the SHIA and KRA to clarify any remaining concerns regarding statutory deductions, tax relief eligibility, and compliance with the SHI Act.
Tutorials Handbook is your trusted online resource blog for clear, insightful and comprehensive blog posts tailored to the unique needs of Kenyans. We cover a wide range of topics such as: Tutorials, Services, Business, Finance, Education, Jobs, Social Media and Technology, providing practical, informative and step-by-step blog posts on a day to day basis. We empower Kenyans by delivering accurate, helpful and relevant information.
WE ARE AVAILABLE ON SOCIAL MEDIA