NSSF Pensionable Earnings
Under the NSSF Act, NSSF contributions are not calculated on gross pay. They are calculated on “pensionable earnings”, which leaves out irregular payments such as overtime and bonuses.
In short
- Included: basic salary, plus any allowance that is fixed and paid regularly as part of the employee’s contract.
- Excluded: payments that vary or are not paid on a fixed basis, such as overtime, bonuses and commissions. The law calls these “fluctuating emoluments”.
How to work out NSSF contributions
- Start with the employee’s regular monthly wages: basic salary plus fixed allowances.
- Leave out overtime, bonuses, commissions and other fluctuating items.
- Apply the Lower and Upper Earnings Limits for the relevant year. Pensionable earnings can never be more than the Upper Earnings Limit.
- Take 6% of the result for the employee and 6% for the employer.
Payments that are left out
These are treated as fluctuating emoluments and do not count towards pensionable earnings:
- Overtime
- Bonuses
- Commissions
- Shift pay (when variable)
- Service charge
- Acting or special duty allowances (when not fixed)
- Benefits in kind, leave allowance, etc.
What the law actually says
1. Pensionable earnings (NSSF Act, No. 45 of 2013)
Section 2 defines:
“pensionable earnings” means for a Pension Fund Member, the lower of the member’s monthly wages and the Upper Earnings Limit.
2. Wages
The same section further provides that:
“wages” include all emoluments payable to an employee under a contract of service … excluding fluctuating emoluments.
Put together: pensionable earnings = wages (excluding fluctuating emoluments), capped at the Upper Earnings Limit for the year.
3. Fluctuating emoluments
These are defined in the National Social Security Fund (Member Contributions) Regulations, 2014 (Legal Notice No. 81 of 2014), Regulation 3:
“fluctuating emoluments” means earnings additional to basic wage or salary not paid on a fixed basis including benefits in kind, acting allowance, special duty allowance, leave allowance, uniform allowance, equipment allowance but including bonuses, commissions, overtime, shift pay, house allowance and service charge.
(The regulation is poorly drafted. It says “including … but including …”. The clear intent, confirmed by how the Act and the Regulations work together, is that all of these items are treated as fluctuating emoluments.)
Why the confusion exists
Many payroll systems and employers simply take “gross pay” (which includes overtime and bonuses). The Act deliberately separates regular contractual earnings from fluctuating ones. The Regulations reinforce this by requiring contributions to be calculated on pensionable earnings excluding fluctuating emoluments (see Regulation 5(2) of the Member Contributions Regulations).
This is governed by the NSSF Act, 2013 (sections 2 and 20) read together with the NSSF (Member Contributions) Regulations, 2014. No other Finance or Tax Act overrides this definition for NSSF purposes.