January 27 2022

Uganda Expands Social Security Coverage

Source: IBFD Tax Research Platform News

The Ugandan government has enacted the National Social Security Fund (NSSF) (Amendment) Act 2021 (the Act) with the aim of increasing social security contribution coverage by making contributions to the NSSF mandatory for all workers in the formal sector and further allowing workers in both the formal and informal sector to make voluntary contributions to the NSSF.

Major highlights of the Act are as follows:

  • it is mandatory for every eligible employee to register as a member and make contributions to the NSSF. The Act also obliges every employer, irrespective of the number of employees, to register with the NSSF as a contributing employer. According to the National Social Security Fund Act 1985 (NSSF Act), the employee's contribution amounts to 5% of his monthly wage while the employer's contribution amounts to 10% of the employee's monthly wage;
  • repealing the provision allowing cancellation of registration of a member if in the 2 years immediately preceding their application, the member has employed less than the minimum number of employees required (i.e. 5 employees) for compulsory registration. Previously, employers were only eligible for compulsory registration and contribution if they employed 5 people. However, voluntary registration for employers that did not meet this threshold was acceptable;
  • allowing mid-term access to benefits by members who have made contributions to the NSSF upon fulfillment of the following conditions:
    • a member must have made voluntary contributions to the NSSF;
    • a member must be 45 years and above and have made contributions for at least 10 years to the NSSF to be able to access up to 20% of their accrued benefits; or
    • a member must be a person with disability, aged 40 years and above and have made contributions to the NSSF for 10 years to be able to access up to 50% of their accrued benefits.

    Previously a person could only access their benefits at 50 years if they had retired from employment; were not engaged in any gainful occupation; or intended to engage in gainful occupation occasionally.

  • every worker can voluntarily save with the NSSF, over and above the mandatory 15% contributions. Any self-employed persons or any other person may also apply for membership and make voluntary contributions to the NSSF; and
  • a person is entitled to payment of the full balance of his savings with the NSSF if he ceases to be a member of the NSSF, in case:
    • they are employed in an organization that is exempted from NSSF; or
    • they emigrate permanently from Uganda to a country with no reciprocal arrangement for NSSF savings.

The NSSF Act has not been amended since its enactment in 1985 but on 17 February 2021 the parliament passed the NSSF (Amendment) Bill 2021 which was assented to by the President on 2 January 2022. Earlier amendments were proposed in the NSSF Bill 2019 but were not approved due to specific clauses which caused controversial views from the public.