Government To Penalize Employers Over Remittance Of Sacco Deductions

The government may soon penalize employers for defaulting to remit of their staff dues to Savings and Credit Cooperative Organizations (SACCOs). Employers who fail to remit the deductions from salaries of SACCO members risk having their bank accounts seized or may be compelled to pay interest on defaulted payments. Cooperative and Micro, Small and Medium Enterprises (MSME) Cabinet Secretary Simon Chelugui yesterday said the issue of non-remittance by employers to Sacco’s will be handled through a legal framework. He told a Cooperative Leaders consultative conference in Naivasha that the ministry had drafted a new Cooperative Bill 2023, aimed at revamping the gaps in laws affecting the running of the multi-billion co-operative movement sector to ensure that employers were accountable to their staff welfare. ‘The bill has created a powerful position of the commissioner for cooperatives, rekindling moments the movement enjoyed of a powerful commissioner before the liberation of the subsector in the 1990s. The bill will equally help to correct numerous failures the movement is grappling with, mainly poor governance, poor image, and low penetration,’ he said. The CS noted that a good number of Sacco’s are struggling financially as employers mainly county Governments and agencies in line ministries continue withholding employees’ dues. Chelugui warned that recovery of the debts will be going forward be anchored in law and employers subjected to tough penalties which include capture of their bank accounts. ‘Part of the provisions in the bill includes empowering the commissioner for cooperative to apply tough penalties to employers who fail to remit member deducted dues and the bill has provided an elaborate procedure of recovering defaulted payments to the Saccos and the penalties will be preferred against the employers accused of withholding the Saccos member dues,’ he noted. So far Chelugui confirmed that out of Ksh. 4 billion that was outstanding at the beginning of the year, the Ministry has facilitated recovery of Ksh. 500 million and the defaulters have through mediation by the State Department of Cooperatives entered into agreements on how to clear the balance ‘The Ministry is keenly monitoring them with a view of initiating legal redress in case of defaulting the terms of agreements’, he added. Commissioner for Cooperatives David Obonyo said that ‘Section 73 (1) of the cooperative bill states Where an employer of a person who is a member of a Cooperative has, under the instructions of the employee, made a deduction from the employee’s remuneration or payment for produce for remittance to the Cooperative concerned but fails to remit the deductions within seven days after the date upon which the deduction was made, the employer shall be liable to pay the sum deducted together with compound interest thereon at a rate of not less than five percent per month. ‘If the bill is enacted into law, the Commissioner will have powers through a written notice, appoint any person, bank, or institution to be an agent of the Cooperative for collection and recovery of a debt owed to the Cooperative. Chairman Cooperative Alliance of Kenya CAK Mcloud Malonza said that the challenge of remittance is still affecting the movement with some employers who normally take so long to submit members’ contributions to the Sacco’s and this has impacted the member’s service delivery. He however thanked the Government saying that the passing of a cooperative bill would ensure that some of the major challenges facing the numerous Sacco and ensure that it will bring together all in one structure and have one focus and one direction The majority of deposit-taking Sacco’s in Kenya has been experiencing financial instability due to the failure of state agencies and private companies to remit statutory deductions on time. As the government streamlines savings and credit co-operative societies that are reeling under the weight of mismanagement, fraud, and bad loans, failure by employers to remit deductions is increasingly becoming a big threat to the survival of many Sacco’s.

To tackle this, the Sacco Society Regulatory Authority (SASRA) developed legal and institutional proposals to protect Sacco’s from such employers, and the cooperative bill that is at the Attorney Generals will address this challenge.

Source: Kenya News Agency