The Supreme Court of Kenya has delivered a serious setback to the now-defunct National Health Insurance Fund (NHIF) by ruling that all NHIF employees are public officers and must fall under the control of the Salaries and Remuneration Commission (SRC) when it comes to salary matters.
In a landmark judgment delivered on Friday, May 30, the Supreme Court resolved a long-standing dispute involving NHIF, the Kenya Union of Commercial Food and Allied Workers, and the SRC.
The issue at hand was the legality of collective bargaining agreements (CBAs) negotiated between NHIF and the union for the years 2013 to 2015, which were done without consulting the SRC.
Although the SRC has clear guidelines that require all public institutions to seek its advice before setting salaries and benefits, NHIF and the workers’ union proceeded with salary negotiations independently.
After finalizing their agreement, they submitted it to the SRC for approval, but the commission rejected the proposed salary increases.
The SRC argued that the salary hikes were unsustainable and did not follow its regulations.
It recommended lower salary increases and allowances, which the union rejected, leading to the legal standoff.
At the heart of the case was the question of whether NHIF staff should be considered public officers and, if so, whether SRC had the legal mandate to regulate their pay.
Initially, the matter was taken to the Employment and Labour Relations Court (ELRC), which ruled in favor of NHIF and the union.
The court stated that the SRC’s role was merely advisory and that it should not interfere with employees’ rights to negotiate their pay through collective bargaining.
However, the SRC was dissatisfied with the ELRC’s decision and filed an appeal. The Court of Appeal overturned the earlier ruling, stating that NHIF, as a state corporation, employs public officers and must therefore operate under the SRC’s oversight.
The appellate court further clarified that while collective bargaining is allowed, NHIF is constitutionally required to consult the SRC, and its advice must be taken seriously.
Still unhappy with the outcome, NHIF’s management board took the matter to the Supreme Court, which on May 30 upheld the Court of Appeal’s ruling.
The highest court in the land confirmed that NHIF is a state corporation under the State Corporations Act, as it was created by an Act of Parliament—the NHIF Act. Therefore, the institution and its employees are bound by SRC regulations.
“In this context, we acknowledge that NHIF qualifies as a State corporation under Section 2 of the State Corporations Act because it was formed through an Act of Parliament. As a result, the appellant is required to comply with SRC guidelines,” the ruling read in part.
Following this final decision, NHIF must now strictly follow SRC’s salary guidelines and cannot make any decisions regarding staff pay without first consulting the commission.
Any salary agreements or increases that were previously made without SRC approval are now considered null and void under the Supreme Court ruling.
The SRC plays a key role in ensuring financial accountability across government agencies. Its involvement is meant to prevent public bodies from offering unaffordable and irregular salary increases, which can lead to financial strain within the public service sector.
This ruling not only reinforces SRC’s authority over public salary matters but also sends a strong message to all state corporations and public institutions to adhere to proper legal processes when handling staff remuneration.
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