The National Health Insurance Fund (NHIF) is facing one of its most crushing legal defeats in years after the Supreme Court ruled that its employees are public officers, subject to the Salaries and Remuneration Commission (SRC) oversight.
The judgment doesn’t just change how NHIF manages its payroll—it wipes out years of unchecked salary agreements, shakes its leadership, and forces a painful financial reckoning.
To make matters worse, several NHIF officials now sit behind bars as police investigate suspected abuse of office tied to the contested payouts.
Supreme Court Ruling Turns Tables on NHIF Salary Deals
The Supreme Court ruling, delivered on Friday, May 30, affirmed that NHIF must seek advice from the SRC before negotiating or implementing any salary or benefit adjustments. This puts an end to years of unchecked collective bargaining deals carried out between NHIF and the Kenya Union of Commercial Food and Allied Workers (KUCFAW) from 2013 to 2015—deals the court now deems illegal.
NHIF had ignored SRC guidelines and pushed forward with salary negotiations, despite being a state corporation. It submitted a collective bargaining agreement (CBA) to the SRC only after signing it with the union.
The SRC rejected the proposed hikes, citing their unsustainability and non-compliance with government wage policies. SRC offered lower pay adjustments and modest allowances, but the union balked. NHIF and the union took the battle to court and initially won in the Employment and Labour Relations Court.
That lower court declared SRC’s role as purely advisory, stating it couldn’t interfere with CBAs. But SRC appealed—and the Court of Appeal overturned the ruling, firmly stating that NHIF employees, as public officers, fall under SRC’s watch.
NHIF then took the matter to the highest court in the land, and on May 30, the Supreme Court brought the hammer down: NHIF was out of order. The judges ruled that the NHIF Act, which created the fund, places NHIF squarely within the scope of state corporations.
As such, it is bound by the Constitution to consult the SRC and adhere to its advice before entering any agreements on pay.
NHIF Faces Budget Blow and Scrutiny Over Past Deals
The consequences of this ruling are massive. NHIF must now void all CBAs it approved without SRC review and recover millions in irregular payments. Investigators are scrutinizing how officials made those deals—and who benefitted.
Insiders say some salary increments reached as high as 40%, far beyond what SRC guidelines allow. With the Supreme Court ruling those agreements unlawful, NHIF may have to claw back payments or restructure its budget to absorb the financial damage. Either path will come with internal friction and likely public outrage.
NHIF’s Management Board now finds itself in hot water. Multiple board members and senior officials were arrested on Thursday night and are being held by anti-corruption police. Officers are probing how and why they bypassed SRC rules, and whether any of them gained financially from the bloated salaries. Charges could include abuse of office, financial mismanagement, and violation of procurement laws.
One source within the Directorate of Criminal Investigations said the arrests were just the beginning, and more former and current employees could be summoned. Whistleblowers had long flagged irregularities in how NHIF handled its salary structure and recruitment. The ruling now opens the door for formal accountability.
SRC Flexes Legal Muscle in Fight for Fiscal Discipline
This case has elevated the role of the Salaries and Remuneration Commission and underlined its power in Kenya’s wage governance system. The Supreme Court’s decision clearly establishes that SRC’s input is not optional—it’s a constitutional requirement.
By requiring public institutions to consult SRC, the court is effectively shutting down the freewheeling salary practices that have drained public funds for years. State corporations like NHIF now have no choice but to toe the line or face legal, financial, and criminal consequences.
SRC welcomed the ruling, calling it a victory for fiscal prudence and rule of law. “This decision strengthens our mandate and safeguards public resources from reckless salary deals,” said one commissioner.
The ripple effect of this ruling is expected to reach other state agencies that may have similarly ignored SRC advice in previous CBAs. Already, unions in sectors such as parastatal transport and water services are bracing for possible renegotiations and legal audits.
