Rwanda
Changes to Rwanda Social Security Board (RSSB) – Pension contributions
Impact date: January 2027 (further increase to the contribution rate) In January 2025, Rwanda commenced the implementation of significant changes to its pension system, impacting both employee and employer via the Presidential Order n° 086/01 of 12/12/2024 determining the contribution rate to mandatory pension scheme.
The pension contribution rate will increase from the current 6% to 12% to reach 20% by the year 2030, split equally between employer and employee. This increase is intended to strengthen the pension fund and provide greater long-term benefits to retirees.
To facilitate a smooth transition, the increase from 12% to 20% will be implemented in four years with 2% annual increase from 2027 to reach 20% in 2030.
The pension contribution base will shift from the current coverage which excludes transport allowance to also include transport. In addition, to harmonize contributions with RRA taxable base, the pension contribution base will expand from the basic salary and housing allowance to the total gross salary, which will now include transport allowances.
The phased approach to increase the pension rate ensures individuals and businesses have sufficient time to adjust to the new rates while strengthening long-term financial security for retirees.
Currently, the total contribution rate is set at 6% of the employee's basic salary, with the employer contributing 3% and the employee contributing 3%.
The declaration of all RSSB contributions is done online through the recently introduced RSSB system known as Ishema and are made on monthly basis; not later than the 15th day of the month following the month to which the contributions relate.
Employer implications/action needed
- likelihood of a potential reduction in the employees’ take-home pay unless employers decide to absorb the increased contribution on their behalf
- review of employment contracts to capture these changes as the 6% contribution rate applies to a broader salary base. This entail drafting of addendums that specify the increased contribution rates, the shared responsibilities between employers and employees, and any agreed adjustments to salaries or benefits
Employer risk
- because of higher payroll costs, Employers have to budget for these changes earlier enough by reviewing and adjusting budgets to accommodate the increased employment costs due to doubled pension contributions and expanded taxable salary bases
- inclusion of transport allowances in the pension contribution base is likely to significantly impact taxation for both employers and employees. Considering that transport allowances (if granted before) will now be treated as taxable income, the total tax burden on both employers and employees will increase. This alignment eliminates ambiguities but raises the overall cost of employment
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