The Low Cost Housing Scheme finally comes into effect; first deductions to be made in the April, 2019, payroll.

After months of pull and shove between the government and workers’ unions, the Housing levy by the government has finally been effected. Employees and employers will make their first contributions into the scheme in May, 2019. Via a paid up advert in the local dailies, the Kenya Revenue Authority (KRA) and the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works say the first batch of the contributions should be effected by 9th May, 2019.

“The Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in conjunction with Kenya Revenue Authority wishes to inform employers, employees and the Public that the provision of the Finance Act 2018 relating to Housing Fund Levy has come into effect,” reads a joint notice by the taxman (KRA) and the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works; appearing on today’s dailies.

The implementation of the housing levy has had rocky times with the umbrella workers’ union, the Central Organization of Trade Unions (COTU), filing a case in court against it.

In the housing levy that is taking effect this month, April, 2019, both the employer and the employee shall each contribute 1.5% of the employee’s monthly basic salary, provided that the sum of the total monthly contributions shall not exceed five thousand shillings (Kshs 5,000). It is important to note that this is a statutory deduction that will affect all workers in formal employment.

For those in informal employment, they can make voluntary contributions to the scheme; at a minimum of two hundred shillings per month.

“The Employers are required to deduct and remit the levy together with other statutory levies from both the employer and employee by the 9th of each succeeding month together with other payroll statutory deductions,” adds the notice.

Consequently, the first contribution shall be due by 9th May, 2019; meaning employees will expect the deduction in the April, 2019, salaries.

The Housing Fund shall be used to finance the Affordable Housing Scheme under the Big 4 Agenda by the Government. This is in a bid to ensure employees own decent housing units; according to the government.

The benefits of contributions in respect of the employee shall include;

1. Purchase of a home under the affordable housing scheme
2. In case of ineligibility for a home the contribution may be transferred;
   a). To a pension scheme or
   b). To another person under the scheme as cash to self, spouse or a dependent child.

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Frequently asked Questions about the Contributory housing scheme