Naivasha, Kenya – The Kenyan government is set to introduce legal measures to penalize employers who fail to remit staff dues to Savings and Credit Cooperative Organizations (SACCOs). This move is aimed at safeguarding the financial health of SACCOs and ensuring employee welfare.
According to Kenya News Agency, Small and Medium Enterprises (MSME) Cabinet Secretary Simon Chelugui, the issue of non-remittance by employers will be addressed through a new legal framework. Speaking at a Cooperative Leaders consultative conference in Naivasha, Chelugui revealed that the Ministry has drafted the Cooperative Bill 2023. This bill is designed to revamp laws affecting the multi-billion cooperative movement sector and hold employers accountable for their staff’s welfare.
Chelugui highlighted that the bill proposes to create a powerful position of the commissioner for cooperatives, reminiscent of the role that existed before the sector’s liberalization in the 1990s. The bill aims to address challenges such as poor governance, poor image, and low penetration in the cooperative movement.
A significant number of SACCOs in Kenya are struggling financially due to non-remittance of employee dues by employers, especially county governments and agencies in line ministries. Chelugui warned that the recovery of these debts would be legally enforced, with potential penalties including seizure of bank accounts.
Key provisions in the bill empower the commissioner for cooperatives to apply strict penalties to defaulting employers. The bill outlines procedures for recovering defaulted payments to SACCOs and specifies penalties against employers who withhold members’ dues.
The Ministry has already facilitated the recovery of Ksh. 500 million out of Ksh. 4 billion outstanding at the beginning of the year. Employers who have defaulted have entered into agreements mediated by the State Department of Cooperatives to clear the balance.
Commissioner for Cooperatives David Obonyo cited the Cooperative Bill’s Section 73 (1), which states that employers who fail to remit deductions within seven days will be liable to pay the sum deducted with compound interest. The Commissioner would have powers to appoint agents for debt collection and recovery owed to the Cooperative.
Chairman of the Cooperative Alliance of Kenya (CAK), Mcloud Malonza, expressed concerns about delayed remittance impacting member services. He welcomed the new bill, noting that it would address major challenges faced by SACCOs and bring a unified focus and direction.
The majority of deposit-taking SACCOs in Kenya face financial instability due to the failure of state agencies and private companies to remit statutory deductions promptly. The Sacco Society Regulatory Authority (SASRA) has developed proposals to protect SACCOs from such issues, and the cooperative bill, currently with the Attorney General, aims to address these challenges effectively.