In a bid to recover more than Shs 160bn in unremitted contributions, the National Social Security Fund (NSSF) has announced a grace period of three months for defaulting employers to agree a payment plan.
Only those that have not remitted employees’ social security contributions are affected. In exchange, the Fund will waive up to 95 per cent of the penalty amount owed, Richard Byarugaba, the NSSF managing director, said in a statement recently.
About 10,000 out of more than 33,270 employers registered with the Fund have not paid NSSF contributions in a period ranging from two months to seven years, thereby denying their employees social security protection.
Byarugaba said although it is the obligation of every employer to pay social security contributions for their employees on a timely basis and the correct amounts, the Fund recognises that for various reasons, some employers may be unable to remit funds on a regular basis. Eventually, they get overwhelmed by the arrears and penalties levied on unremitted funds.
“Therefore, for the next 90 days, we have declared an amnesty for all defaulting employers to allow them negotiate payment plans with the Fund. In turn, I will waive up to 95% of the penalty the defaulting employer is supposed to pay. This is on condition that such an employer comes forward, commits to clear all the arrears owed in a period to be agreed by signing a deed of settlement,” Byarugaba said.
He added that using a similar approach, the Fund has already recovered about Shs 13.7bn from 380 employers since July 2017. Byarugaba said employers that do not take advantage of the amnesty window risk court action to recover the arrears, the penalty and interest accrued.
“Litigation is our last resort. We prefer to have discussions with employers as per our Relationship Management business model, because we understand that sometimes, businesses face challenges with their cash flows. However, employers that not only categorically default but are also unwilling to agree payment plans with the Fund will be taken to court,” he said.
As at end of December 2018, the Fund was worth Shs 10.2 trillion, up from Shs 8.7 trillion in December 2017. Monthly average contributions are now at over Shs 96bn.