The Ministry of Finance will discontinue all discretionary payroll deductions for government employees, with the Payroll Deduction Management System (PDMS) scheduled to shut down on 30 November 2025.
A directive issued on 28 August informed employees and financial institutions that government’s contract with Avril Payment Solutions, the operator of the system, will not be renewed.
With immediate effect, no new voluntary payroll deductions may be loaded onto the PDMS.
Existing loans already linked to the system will continue to be serviced internally by the Ministry until they are repaid in full.
However, insurance premiums, union fees and other voluntary deductions must be shifted to alternative payment methods, such as bank debit orders, before the closure. Statutory deductions, including PAYE, pension contributions and Social Security, will remain unaffected.
Government has provided a three-month transition period to allow affected parties to secure new collection arrangements. From December, no non-statutory payments will be processed via the government payroll.
The decision has been associated with procurement limitations as well as regulatory concerns previously raised by the Bank of Namibia and the Namibia Financial Institutions Supervisory Authority (NAMFISA).
Issues included the risk that prioritisation of certain payments could compromise the integrity of the national payment system, and that some microlenders were relying too heavily on payroll safeguards rather than conducting affordability checks required by law.
The phasing out of payroll codes means lenders will now be required to conduct proper affordability assessments and carry more risk themselves. For civil servants, the end of payroll deductions is expected to significantly alter how they access credit, manage insurance, and structure monthly payments.
Loan approvals are expected to become more difficult, particularly for lower-income and rural employees, as lenders will no longer have the security of direct payroll collection. This is likely to tighten lending terms and reduce loan sizes.
Banks and microlenders are also expected to increase interest rates and fees to cover higher risk, which could make even small monthly repayments more expensive once debit order charges are applied.
Industry data suggests that smaller insurance policies may become unviable once transferred to debit orders because of additional charges.
While the change may reduce over-indebtedness in theory, it also risks leaving thousands without insurance protection and increasing the cost of credit. The abrupt implementation is expected to cause short-term financial strain for many government workers.
The directive follows a moratorium imposed two years ago by the Ministry of Finance, together with NAMFISA and the Bank of Namibia, on the issuance of new payroll deduction codes while reviewing the relevance of the PDMS. That review has now culminated in a complete phase-out.
The PDMS was introduced in 2003 when Avril Payment Solutions was appointed to implement the web-based platform.
It centralised deductions between the Payroll Office and financial institutions, easing regulatory and administrative burdens at no cost to government or employees, while broadening access to financial services for civil servants.
