NAIROBI, October 30, 2024 – Kenyan employees are grappling with reduced net salaries following the implementation of the new Social Health Authority (SHA) deductions, which came into effect on October 28. The mandatory 2.75% deduction on gross salaries is a significant shift from the previous National Health Insurance Fund (NHIF) rates, with a heavier burden falling on middle-income earners.
Rebranded SHA offices, formerly NHIF; Courtesy Photo
Under the SHA scheme, workers earning Ksh50,000 will now see Ksh1,375 deducted from their monthly salaries. Similarly, those with a gross income of Ksh70,000 will contribute Ksh1,925 monthly, while employees earning Ksh20,000 will pay Ksh550.
This transition from fixed monthly contributions to percentage-based deductions marks a departure from the previous NHIF model, which had contributions ranging from Ksh500 to Ksh1,700, depending on income levels. Under the former system, annual payments ranged between Ksh6,000 and Ksh20,400, offering more predictability for employees. However, the new percentage-based structure places a heavier financial burden on higher earners, with deductions now increasing in proportion to salaries. Middle-income workers, who already shoulder significant tax responsibilities, are likely to feel the most impact from the change.
“The reform aligns with our commitment to making quality healthcare accessible to every Kenyan,” stated a health ministry spokesperson. “The percentage-based contributions will allow the system to grow with the economy, ensuring continuous service delivery.”
Despite these assurances, the timing of the SHA rollout has raised concerns. Kenyan households are already grappling with rising living costs, including food prices, rent, and transportation. With inflation exerting pressure on disposable incomes, the new health deductions come as an additional financial strain for many families.
“I used to pay Ksh1,200 under the old NHIF system, but now I’m paying nearly double,” said James Njoroge, a Nairobi-based accountant. “It’s tough, especially with everything becoming more expensive.”
Employers are also monitoring the impact on workforce morale. A human resource officer at a private company in Nairobi noted that while the intention behind the SHA reforms is commendable, workers are concerned about the immediate effect on their disposable income.
“We understand the need for healthcare reforms, but the transition could have been handled more gradually,” she remarked.
The government maintains that the new deductions will benefit all Kenyans in the long run by enhancing healthcare access and reducing out-of-pocket medical expenses. However, analysts warn that the increased deductions might reduce consumer spending, impacting the broader economy.
“Increased contributions during a time of financial hardship may lead to reduced consumption, which can have ripple effects on economic growth,” cautioned economist David Ogolla.
As the SHA system takes root, many Kenyans are left to adjust their budgets and cope with reduced paychecks. It remains to be seen whether the promise of better healthcare coverage will outweigh the immediate financial pain for workers.
The new health insurance policy is one of the most significant changes to employee compensation in recent years, and its effects on household finances and the national economy will likely unfold over time.