Finance act 2023

Finance act 2023 highlights

The Finance Act 2023 received Presidential assent on 26th June 2023. Most of the changes will be effective from 1st July 2023, which is the Government’s fiscal year, while a few will be effective from 1st September 2023 and 1st January 2024.  Some of the legislative highlights are as follows:

Housing Tax

Initially, the housing levy introduced by former president Uhuru Kenyatta’s government was set at 1.5% as a contribution. The proposed housing tax per the 2023 Bill proposal was a 3% deduction. However, the 2023 Finance Act sets it as a tax of 1.5% of the gross pay. It means that if an employee earns a gross pay of Ksh.30,000 monthly, they will contribute Ksh. 450 to the housing levy. But even with approval, the housing levy has been pushed to January 1st, 2024, for implementation, giving authorities time to develop a proper framework and legislation around it. 

VAT 

The proposed increase in Value Added Tax or VAT on fuel from 8% to 16% was signed into law. There was much controversy on the proposal as fuel prices in Kenya have remained significantly high since 2022. The new fuel VAT means employees will pay more for fueling cars while commuting to work. Similarly, businesses using petroleum products may face higher fees for the purchase. 

Corporate Tax

Beginning July 1st, 2023, businesses whose turnover is more than 25 million annually will be graduated into the corporate tax category, set at 30%. In the previous case, companies faced a turnover rate of 1%. It presently affects business owners but could see employees face financial challenges such as downsizing and salary cuts depending on how employers handle the situation. 

PAYE (Pay As You Earn)

The Finance Act 2023 has introduced a new Paye tax band of 32.5% for individuals earning a gross salary of Ksh.500,000 to Ksh. 800,000 monthly. Similarly, there is a new 35% band for gross pay above 800,000. For instance, if an individual earns a gross pay of Ksh.600,000, their PAYE deductions would be $195,000. Employees in this earning range will part with such amounts as the act takes effect on July 1st, 2023. 

Digital Creators Tax 

The proposed digital content creators’ tax was set at 15%, but the finance act set it at 5%. It means digital content creators will remit 5% of earnings from content creation using digital devices. The tax only applies to content creators

Rights of an employee in Kenya

Employee rights and benefits elaborates the current policies and the procedures in regards to Labour laws of Kenya, these include leave policies, minimum wage, retirement benefits and employee well-being. These particular regulations are very critical in making sure there is fair treatment of all the employees and that there exists no discrimination

Every person has the right to fair labour practices under the Constitution of Kenya, 2010. Article 41 Provides that an employee has the right to:

  1. Fair remuneration
  2. Reasonable working conditions
  3. To form, join, participate in activities and programs of a trade union
  4. To go on strike
  5. To further explain these rights, the Employment Act places the basic minimum conditions of employment. Any contract of service, collective bargaining agreement, other law or court order shall be accepted where they are more favourable than those in the Employment Act.

However if an employment contract has terms and conditions are less favourable than those provided in the Act, the terms in the Act prevail over the contract or collective bargaining agreement, other law or court order.

Hours of work (Section 27); 

  1. Employee is entitled to at least one day of rest in every period of seven days.
  2. The International Labour Organisation standard is 8 hours a day or 48 hours a week.

Annual Leave; ( Section 28);

  1. Not less than 21 working days of leave with full pay after twelve consecutive months of service.
  2. Not less than 1 and ¾ days of leave with full pay, from second month,  for every month completed, where employment is terminated before 12 months
  3. An employer may with consent of employee divide the annual leave into different parts to be taken at different intervals.
  4. Unless otherwise agreed, the employee shall have at least two uninterrupted working weeks of entitled annual leave.
  5. The 2 weeks of leave are taken during the 12 consecutive months and the balance of leave to be taken no later than 18 months of leave period.
  6. Where more than 21 days of leave are provided by the employer, the leave days may be taken as agreed.

Maternity Leave (Section 29);

  1. A female employee is entitled to THREE months maternity leave with full pay.
  2. After maternity leave, to return to the same job or other suitable job on terms and conditions similar or better than position before going on leave.( i.e. no demotion or reduction of pay)
  3. An employer may extend maternity leave to more than 3 months
  4. An employee and employer can agree that sick off, compassionate leave or annual leave to be an extension of the maternity leave.
  5. Employee is to issue a 7 day notice in writing requesting for the maternity leave and should state date to leave and date to resume work.
  6. An employer can seek confirmation of pregnancy from a medical practitioner or midwife before granting the maternity leave.
  7. Female employee is entitled to maternity AND annual leave.
  8. Male employee is entitled to TWO weeks paternity leave with full pay. 

Sick Leave ( Section 30);

  1. Employee is  entitled to sick leave on completion of at least two months of employment
  2. Sick leave is SEVEN DAYS on full pay and subsequent SEVEN DAYS with half pay for a period of twelve months of consecutive service.
  3. Sick leave is subject to:- Employee producing Certificate of Incapacity to Work signed by a medical practitioner or person in charge of the dispensary or medical aid centre where treatment is administered and Employee notifying employer of cause of absence as soon as practicable

Housing ( Section 31);

  1. An employer shall provide reasonable housing near place of work or pay an Employee sufficient sum as rent in addition to wages or salary to enable employee obtain reasonable accommodation.
  2. The above does NOT apply to  Employees whose salary includes an element of rent and Subject to a collective agreement that factors in rent in the wages or salary
  3. The Minister may by Gazette notice exclude application of this requirement to some employees.

 Water ( Section 32);

  1. Employer to provide sufficient supply of wholesome water for employees to use at place of employment.
  2. Employer to provide sufficient supply of wholesome water for employees to use at housing provided by the Employer

Food ( Section 33);

  1. Where provision of food is in the contract of service, Employer shall ensure the employee is properly fed and provided with proper cooking utensils and means of cooking at the Employer’s expense.
  2. This right is only for Employees on duty

Medical attention ( Section 34);

  1. Employee shall notify employer as soon as possible at first occurrence of any illness or sickness.
  2. Employer shall ensure the sufficient provision of proper medicine for his employees during illness and if possible medical attendance during serious illness.
  3. Where employer is not aware of the illness he is not required to provide medical attention
  4. The employer has no obligation where the employee contracted the illness when he was absent from work without lawful excuse or cause.
  5. The employer has no obligation where illness or injury is self-inflicted
  6. Employer is under no obligation where treatment is provided by the Government free of charge or under any insurance scheme which covers the employee. 

Fair termination and dismissal (Part VI)

  1. Termination notice must be in writing except in cases where the contract is to pay wages daily.
  2. Where the employee does not understand the notice, the employer should explain the notice orally to the employee in a language he understands
  3. The employee has the right to dispute the lawfulness or fairness of the termination 
  4. Employee is entitled to service pay for every year worked, the terms of which are fixed by the employer
  5. Summary dismissal applies where employer terminates the employee without notice or with less period of notice
  6. Employer may dismiss an employee summarily when the employee breaches the obligations set out in the contract of service
  7. No employer shall terminate the employment of an employee unfairly
  8. Unfair termination arises where:-

Breastfeeding (Section 71 and 72)

The HEALTH ACT safeguards the right of female employees to breastfeed and ensures that employers create favourable conditions for female employees who are breastfeeding.

  1. All employers are required to establish lactation stations in the workplace
  2. The lactation stations should be adequately provided with necessary equipment and facilities including hand washing equipment, refrigerators or appropriate cooling equipment, electrical outlets for breast pumps, a small table and comfortable seats
  3. Lactation stations are private, clean, sanitary and well ventilated rooms or areas in the workplace where nursing mothers can wash up, breast feed or express their milk and hygienically preserve it.
  4. The lactation station should not be located in the rest rooms
  5. The employer is required to grant all nursing employees break intervals in addition to the regular times off for meals to breastfeed and express milk

New NSSF Rates takes effect in February 2023

The National Social Security Fund (NSSF) has released its new contribution rates in compliance with the court ruling.

The government agency responsible for the collection, safekeeping, responsible investment and distribution of retirement funds of employees released the new rates in compliance with the NSSF Act No. 45 of 2013.

In a press release, highlighted the rates as follows:

Employer Contribution Employee Contribution
Tier 1 (Ksh) 360 360
Tier 2 (Ksh) 720 720

Employees and employers will start feeling the impact of new pension contribution rates this month after the National Social Security Fund (NSSF) asked employers to comply with the law raising monthly contributions immediately.  This follows a proposal to increase the National Social Security Fund (NSSF) and National Health Insurance Fund (NHIF) rates as outlined by the NSSF Act 2013.

Employees falling under the tier one category will each contribute Sh360 to the fund monthly, up from Sh200.

NSSF classifies workers under Tier 1 as those earning salaries below Sh18,000, while those earning above this are classified under Tier 2. This means that if you earn below Sh18,000 you will now be deducted Sh360 monthly as your employer matches an equivalent amount to be channeled to your pension. If you earn above Sh18,000, you will be deducted Sh720 monthly with your employer matching an equivalent amount.

NSSF directed that employers and employees under the tier two category will each contribute Sh720 monthly, summing up to Sh1,440 for both parties.

The total contributions for both employee and employer is KES 2160 per month

The changes will be implemented with immediate effect.

Calls to raise the contributions started after President William Ruto insisted on the need to grow the country’s savings to rescue it from debts as he castigated the Sh200 contribution as incapable of benefiting retirees.

“There is no retired Kenyan today who is living on their NSSF retirement benefits. The meager contribution of Sh200 a month adds up to Sh72,000 over 30 years. There is no rate of return on earth that can grow this into an adequate pension,” Dr Ruto told MPs in September. “You cannot pretend that you are saving by saving Sh200.”

Development partners, led by the World Bank, have also supported the increase, stating last year that the Sh200 monthly contribution was low.

“The mandated contribution rate to the NSSF is extremely low, with the average contribution amounting to less than one per cent of the average private sector wage. Low contribution rates during working life and high operating cost of the NSSF mean that retirees typically receive low lump sums,” said the World Bank last year.

Human Resource Management Software explained

Human resources management software assists with managing people, information and processes.

Used by businesses of all sizes, HR software is designed to help both managers and employees work more efficiently while reducing errors, ensuring compliance and increasing productivity.

Almost every business uses some type of HR management software, whether it’s a simple payroll application or a more sophisticated suite of technologies that integrates the entire employee experience, from onboarding to benefits administration to employee document management

Why Companies Need It

As the way we work evolves, so must the way companies manage their workforces. To meet the needs of a modern workplace and to attract the highest caliber talent, companies must invest in new technology to both improve the employee experience and increase the bottom line.

By automating tasks and managing data, human resources software saves valuable time and reduces cumbersome paperwork. When an HR team has all the information they need at the click of a button, errors are reduced, compliance risks go down and policies are more consistently enforced.

By reducing paperwork and streamlining processes, organizations can transform the role of both managers and employees to be more strategic and engaging. HR software allows employees to focus on more high-level tasks, resulting in better planning, more strategic decision making and greater job satisfaction.

Types of HR Software

There are a variety of applications to meet the many workforce management needs of modern companies. The following are some of the most common types of HR software:

Human Resources Information Systems (HRIS)

A Human Resources Information System (HRIS) is a software application for the data entry, data tracking and data management needs of an HR department. Common features of HRIS software include:

  • An employee profile database where managers can easily access contact, salary and performance information
  • An employee self-service portal where employees can manage their own information, view payroll documents and request time off
  • Benefits portals where employees can enroll in and manage their healthcare benefits
  • Recruiting management tools
  • Time and attendance tracking
  • Payroll functionality
  • Learning and Development

Human Resources Management Systems (HRMS)

The term Human Resources Management System (HRMS) is often used interchangeably with HRIS. Technically speaking, an HRIS is a type of HRMS. In the early stages of HR software, HRMS was used for systems that offered more data analytics and forecasting options than a standard HRIS. Today, however, the terms are generally synonymous.

Human Capital Management (HCM)

Whereas HRIS and HRMS software tends to focus on the day-to-day management of employees, Human Capital Management (HCM) software typically includes more specialized tools for workforce planning and analysis. In addition to HRIS/HRMS software features, an HCM system will offer functions such as reporting and data visualization features, as well as predictive HR analytics to assist in planning for future challenges.

Employee Document Management Software

An employee document management system seamlessly manages all aspects of employee files and adds critical security and compliance functionality that is missing in most HRISs or HCMs. This software automates time-consuming paper processes, allowing HR managers to classify, file and route documents with the touch of a button.

Systems integrate with a company’s HRIS or HCM and store all documents in the cloud, making it easy to access files anytime, anywhere. As telecommuting becomes more popular, and employers must maintain compliance across multiple states or countries, an employee document management system is critical to maintaining centralized, audit-ready files.

Applicant Tracking Systems (ATS)

An applicant tracking system (ATS) is a type of specialized software that assists HR managers in recruiting and hiring. Large companies typically use an ATS to assist in collecting and sorting large volumes of resumes. Instead of reviewing each resume, recruiters and hiring managers can search submissions using keywords, as well as automatically filter and rank resumes using certain criteria. Additionally, an ATS can assist with job postings and track candidates throughout the hiring process.

HR Payroll Software

Payroll software automates the compensation process. These applications generate employee checks, initiate direct deposits, calculate taxes, make deductions and maintain payment records. Most programs also incorporate functions that allow management to monitor attendance, time and pay structure

Conclusion

As the world and workplace changes, HR departments must also adapt the latest technologies to serve the needs of employees and organizations. By selecting the right HR software solutions, companies can help ensure that they remain nimble and profitable in a competitive, evolving market.

Memorysoft is a type of Human Resources Information Systems (HRIS). It incorporates all common HR features needed in a Human resources software to assists with managing people, information and processes

What to consider when choosing an Human Resource (HR) Management system

Are you in the process of choosing an Human resource (HR) system for the company? Then you have most likely asked yourself the question if there is something particular you need to think about. And choosing an HR system is not always the easiest as the system range is extensive, and it can be difficult to determine the system’s adaptation to business needs, wishes, and priorities. To help you in your choice of HR-System, we list here some important selection criteria before choosing your new HR system. 

An easy-to-use and flexible HR system for easier personnel management 

An HR system is a software tool designed to support all forms of personnel administration by taking advantage of automation, collaboration, and data. And with the right HR software, personnel management becomes enormously much easier. By digitizing your HR processes with an efficient HR system, you can ensure that you follow up on your employees’ needs, development and performance. 

Technology that supports and benefits all 

Organizations thrive when employees thrive and are engaged. Therefore, look for a user-friendly and flexible HR system that adds real value by putting employees and their experiences first. That being said, the system should not take hours to figure out how to use and then even more hours to train others to understand and use it. A system of technology that supports and benefits everyone is a system that will be the key to your success. 

High data security

HR is at the forefront of data security. And an HR system that not only ensures the security of personal data but also ensures that it is updated and correct, deleted, or anonymized in accordance with relevant legislation is a must. Because HR software companies offer different levels of security and compliance, it is important that you take the time to understand what is being offered. Some relevant questions to ask regarding the HR-System’s data security may be: Where is the data stored? Is the information encrypted and at what levels? What tools are provided to help you manage data in accordance with the GDPR? 

Cloud systems for time-efficient HR processes

With a cloud system, you do not have to think about data space to store the needs of all employees and the HR department becomes more time-efficient. The management of employee data then takes place via a single organized, secure, and centrally located database. In the cloud, you easily build employee profiles with relevant and customized information fields based on your organization’s goals and needs. 

The issue of scalability

It is important that the various functions in the HR software can be scaled up as the business grows. Otherwise, it will be difficult to achieve future desirable system and personnel management benefits. Therefore, ask questions about whether there is a limit to the maximum number of employees that the HR system can support in the future, whether the system can be adapted to other business processes as the company grows and whether the system’s functions are scalable. 

A clear cost structure

As with all change initiatives, we need a clear and transparent cost picture. Choosing an HR system that has a clearly defined cost structure will minimize the risk that future system improvements will be made more difficult or expensive. It is also an advantage to know how the cost picture may increase over time. Therefore, review so that the price picture is easy to understand, that it is transparent, and that a flexible pricing model based on the number of employees is possible. 

The right system supplier

During times of growth and change, HR needs a system solution that can keep up and deliver consistently and optimally. And since the system vendor is responsible for all underlying hardware and software, the updates are usually seamless and you have the benefit of an updated system in real-time. With the right HR system supplier, all personnel data is consolidated and you can handle personnel administration more efficiently. And with smooth data synchronization, all information is always up to date. You avoid time-consuming administrative tasks, so you can focus more on strategic leadership and decision-making tasks.

Memorysoft HR management software

Memorysoft HR management software is one of the best hr management systems in Africa with over 500 users. Together with a simple and intuitive user interface, our support team is available to the user at every stage of the implementation

Benefits of a payroll manager

Payroll is a business-critical operation for every organisation. You must pay your staff accurately and on time to avoid low morale, poor performance and possibly even reputational and legal difficulties. A good computerised payroll system can help you carry out your pay run with greater speed, efficiency and confidence. This software helps you determine how much salary will be credited to employees for the time they’ve worked, which involves calculating their hours and adding on any overtime or bonuses. You can also calculate taxes with minimal errors and finally process salaries to employees’ accounts with payroll management software. It has the following benefits:

1. Assures tax compliance

Tax rules and regulations change annually, making it difficult for companies to stay up-to-date. To help you enhance compliance, most payroll applications come with compliance tools. These monitor changes in tax laws and update you about the modifications, so you no longer have to worry about overlooking any details.

2. Provides additional security

Manual payroll has a lot of gaps that may compromise your business’ confidential data. Using payroll software, you can closely monitor the processes using a dashboard as well as protect your payroll data by making it accessible only through secure channels. This, in turn, helps users prevent lose of files anomalies and security breaches.

3.Time-saving

Payroll management software helps small businesses save time by automating the entire pay roll, as well as providing reports that can be used to track employee hours and other key information. This allows you to focus your efforts on growing your business while still maintaining control over your employees’ paychecks.

2. Cost-saving

Payroll management software can help you cut costs by streamlining the payroll process and eliminating costly errors. You’ll also save money by avoiding costly errors, such as miscalculating taxes or overpaying employees.

3. Efficient Tracking 

Payroll management software allows you to track all of your employees’ data in one place, so you don’t have to spend time searching for it in multiple locations or keep track of it manually—which would leave room for error. The software will also automatically send out tax forms when they’re due and generate reports that will help you stay on top of everything related to the employees status within the company (e.g., hourly wages, overtime hours worked)

4. Error Free Calculations

Payroll management software offers features to automatically calculates and recalculate payroll after taking up data from the attendance management module considering leaves, holidays mentioned in the calendar, and compensatory offs that leave minimal chances of errors, thereby reducing payday blues

5. Employee Self Service

Payroll management software makes it easier for your employees to manage their own payments and deductions such as EPF contributions or health insurance premiums through self-service online portals offered by many providers of payroll management software. Additionally, they can declare their investment, apply for loans, raise tickets for any query and more

6. Automatic Sync Data

If an employee leaves your company suddenly (for example), then they may have outstanding paychecks due them—but if you’re using a payroll management tool then there’s no need for worry because it will automatically update all records when someone leaves so there’s no confusion about who has been paid what amount or when!

7. Reduce Employee Turnover

Payroll management software can help reduce employee turnover by making it easier for you to keep track of your employees’ schedules, pay stubs, and other important information. This means that you’ll have a better idea of what’s going on in your business at all times. This can help you identify problems before they become too big to handle—and keep employees happy!

In conclusion, payroll is a crucial part of running a business, and it can be overwhelming to manage payroll on your own. That’s why you need to make sure you’re using the right tools to make your employees’ experience better without any headaches.

If you are in the market for a payroll management software to use in your company or business, you can start with the Memorysoft payroll module. It offers a comprehensive payroll module that assures streamlined payroll processes in a quick and easy manner.