1.5 percent housing levy pay cut for workers to start March

Transport CS James Macharia. FILE PHOTO | JEFF ANGOTE | NMG 

Formally employed workers could start paying a 1.5 percent salary deduction beginning March 1 to finance construction of cheap houses by the State.

Transport, Housing and Infrastructure Cabinet Secretary James Macharia Tuesday said the government has reached an agreement with the workers’ union, which will pave the way for an end to court injunctions that had stopped the deduction.

“We had injunctions that halted the process, but the parties have agreed to withdraw them so we are ready to proceed with the project,” said Mr Macharia in Nyeri during an inspection of ongoing public projects in the county.

Employment and Labour Relations Court Judge Hellen Wasilwa had granted the order to halt the deductions following an urgent application by the workers’ umbrella body, the Central Organisation of Trade Unions (Cotu) in December.

Cotu secretary-general Francis Atwoli had faulted the tax, saying there was no public consultation before its implementation.

The levy is to be deducted from each employee’s basic salary and remitted to the National Housing Development Fund (NHDF).

Cotu has, however, not made public its position on the matter.

An application filed by the Ministry of Housing asking the court to lift the injunction against the deduction comes at a time when Cotu wants Housing principal secretary Charles Hinga to be found in contempt of violating the very same orders.

Cotu argues that despite knowledge of the order, the PS proceeded to place an advertisement in the local dailies on December 24, inviting certain organisations to forward the names of their nominees to be considered for appointment to the Housing Fund Advisory Board.


Cotu, through lawyer Philip Omoiti, argues that failure to carry out the orders as directed was in total disregard and disobedience of court, and that the union is aggrieved by such disobedience by the PS.

“Good order and the rule of law demands that a court order is obeyed,” argues Mr Omoiti.

Separately, the Federation of Kenya Employers (FKE) has also obtained orders stopping the same ministry from proceeding with the planned appointment of members to the Housing Fund Advisory Board.

The case will be heard on February 26.

According to Mr Macharia, construction of the housing units should begin in a few weeks after the start of the March 1 deductions.

“The project is now clear and will be launched in a few weeks. The first 2,000 units will be constructed in Park Road in Nairobi,” he said.

Mr Macharia said that those who do not benefit from the housing project will get their money back at retirement.

“Those who do not get a house or already have one will get their money back when they retire. The only money that will not be refunded is the employers’ deduction,” he said.

The 1.5 percent levy on salaries is expected to generate about Sh57 billion a year, from about 2.5 million salaried Kenyans, with additional revenue expected to come from voluntary contributors.

Although the initial plans projected the construction of half a million houses, Mr Macharia said that local and international developers have expressed interest in putting up to one million units. It is estimated the project will to cost up to Sh1.5 trillion.

“Actually one investor has expressed interest to fund 100,000 units. The project is no longer a vision, but a reality,” Mr Macharia said.

The government intends to spread the project to other regions including Nyeri, which will get 2,000 units.

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