NSSF to lay off 500 workers in costs cut drive

By GRIFFINS OMWENGA gomwenga@ke.nationmedia.com, Wednesday, May 15  2013

In Summary

• The pensioner’s administrative costs were brought to the fore last year when, for the first time, it published its financial statements in September 2012.
• In the previous financial year, that is 2010, the administrative expenses consumed slightly over half of the members’ contributions of Sh6.7 billion, revealing of a worsening cost management over the two-year period.

The public pensioner will lay off over 500 staff to cut costs.

Speaking to the Nation on the phone, National Social Security Fund (NSSF) managing trustee Tom Odongo said they have set aside Sh1 billion to compensate the laid off workers.

More than 305 employees have been sent packing, and 200 will follow suit by the end of June.

“This is going to see increased returns for pensioners,” Mr Odongo said. The fund has a work force of over 1,700.

The pensioner’s administrative costs were brought to the fore last year when, for the first time, it published its financial statements in September 2012.

According to the annual reports, the fund spent Sh5.2 billion of the Sh6.8 billion remitted by workers on administration.

This means that only Sh47 out of every member’s monthly contribution of Sh200 was actually invested in the year 2011.

During the period, staff costs were over Sh2.6 billion, equivalent to 52 per cent of managing the fund, administrative expenses were Sh1.2 billion, provision for staff contingency Sh494 million and board expenses Sh21 million.

In giving his opinion on the financial statements of the fund last year, the Auditor-General, Mr Edward Ouko, for instance, raised concerns over Sh16 million paid as “severance pay” to a former NSS general manager.

“This was paid under unclear circumstances,” Mr Ouko said, revealing the poor status of the administration costs of the fund.

He further indicated that “it has not been possible to confirm the basis and regularity of the particular payment, and this was not a proper charge to pensioner’s funds.”

In the previous financial year, that is 2010, the administrative expenses consumed slightly over half of the members’ contributions of Sh6.7 billion, revealing of a worsening cost management over the two-year period.

“All these costs were being incurred because of the high employment costs, but we are looking forward to having a very lean workforce that will adequately manage the fund,” Mr Odongo said.
High poverty in old age

National Social Security Fund’s expenses are, however, way above the generally accepted levels, leaving its over 1.2 million active members exposed to high poverty rates in old age.

The fund procured a new information technology system towards the end of last year that is also helping in reducing the manual workforce through automating some services.

The Sh300 million SAP Enterprise Resource Planning is meant to facilitate real time management across its core business functions.

Last year, the government introduced the National Social Security Fund Transformation Bill, 2012 as a public mandatory social security scheme covering all employees in the formal sector and a voluntary scheme for the self-employed and workers in the informal sector who wish to make voluntary contributions to the fund.