Wednesday, April 17, 2024
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Farms Now Required To Pay NSSF

by Wangah Wanyama
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By Ali Twaha

Depending on your operating model at the farm, the country’s new labour rules is likely to disrupt your current relationship with your workers as an employer.

When President Yoweri Museveni assented to the National Social Security Fund (NSSF) Act (Amendment) 2022, it became mandatory for all employers to register with the Fund regardless of size and number of employees. 

The new description of ‘employer’ in the Amendment is more inclined to entities or businesses. This means, if you are involved in agriculture and running it as a formal business, you are mandated to register with NSSF as an employer. 

By registering, your will then be required to declare the number of employees you have. NSSF is a statutory scheme which is funded by contributions from employees and employers of 5% and 10% respectively of the employee’s gross monthly wage. 

“All employers must first regularise their status with NSSF before they do business,” Patrick Ayota, the acting managing director at NSSF, said while announcing a 30-day ultimatum for companies to comply recently. 

After registering with NSSF, assuming you have one worker earning a gross monthly pay of sh500,000. As their employer, you are required to deduct 5% ie. 25,000 . Your 10% is sh 50,000 which then translates into 75,000.

The Act has therefore increased your workers pay by 50,000 (althopugh it does not go to him directly) but he also has top contribute sh25,000.

Under the law, NSSF payment of contributions must be paid by the 15th day of the following month.

This means that mandatory contributions to NSSF will represent a direct expense to you as an employer that must be factored into the overall cost of running the farm as a formal business. 

The NSSF contributions will be required regardless of the financial performance of the business, which is likely to put strain on cash reserves. Businesses that may need more time to comply have been requested to reach out to the fund to avoid penalties. 

“In practice, the penalty for non-compliance with NSSF is very burdensome because it is compounded every month an entity does not pay,” Uganda Law Society chief executive officer, Moses Opolot.

Agriculture is a key economic sector in the Ugandan economy, employing an estimated 70% of the population and contributing over 90% of the country’s exports. 

Over the years, the sector has been constantly evolving, and some of the changes in laws or policies have had significant impact on farmers. 

For instance, a policy on subsiding farm inputs such as seeds, fertilizers, and machinery has helped reduce the cost farmers face and thus attracting more people to engage in commercial agriculture. 

The change in the labour law is likely see a major shift in how commercial farmers relate with their employees to avoid extra additional costs to their operations. 

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