Uwazi Consulting · Nairobi, Kenya

Statutory Deductions in Kenya: A Guide for Employers

PAYE, NSSF, SHIF and housing levy explained for Kenyan employers.

Published 9 November 2026 · Uwazi Consulting

The five deductions at a glance

If you pay anyone a salary in Kenya, these five items apply from the first payslip. Four come out of the employee's pay. Three are costs you carry on top of the salary, and two of those overlap.

ItemEmployee paysEmployer paysBaseDue
PAYEGraduated bands, 10% to 35%, less KES 2,400 personal relief a monthNothingTaxable pay9th of the following month
NSSF6%, maximum KES 6,4806%, maximum KES 6,480Pensionable pay up to KES 108,0009th of the following month
SHIF2.75%, minimum KES 300, no capNothingGross pay9th of the following month
Affordable Housing Levy1.5%, no cap1.5%, matchedGross payWithin 9 working days of month end
NITA training levyNothingKES 50 per employeePer head9th of the following month

A common misreading is that SHIF has an employer match because NHIF arrangements often did. It does not. The employer calculates SHIF, deducts it and remits it, but contributes nothing to it.

The other misreading is that these are all "deductions". NSSF and the Housing Levy are shared — the employee's share comes off the payslip and yours is an additional cost. The NITA levy never appears on a payslip at all.

PAYE: the bands, and the order that matters

PAYE is income tax on employment, deducted by you and remitted to KRA on the employee's behalf. The Finance Act 2026 left the bands and the personal relief alone.

Monthly pay bandAnnual pay bandRate
First KES 24,000First KES 288,00010%
Next KES 8,333Next KES 100,00025%
Next KES 467,667Next KES 5,612,00030%
Next KES 300,000Next KES 3,600,00032.5%
Above KES 800,000Above KES 9,600,00035%
Personal reliefKES 2,400 a month, KES 28,800 a year

What comes off before you apply the bands

This is where payroll most often goes wrong. The bands do not apply to gross pay. They apply to taxable pay, which is gross pay less the amounts KRA treats as deductible:

  • the Affordable Housing Levy deducted from the employee
  • contributions to the Social Health Insurance Fund
  • contributions to a registered pension or provident fund, including NSSF, up to KES 30,000 a month
  • contributions to a post-retirement medical fund, up to KES 15,000 a month
  • mortgage interest on a residential property, up to KES 30,000 a month, where the loan is from one of the institutions specified in the Fourth Schedule to the Income Tax Act

SHIF and the Housing Levy became deductible from 27 December 2024, under the Tax Laws (Amendment) Act, 2024. Insurance relief no longer applies to health contributions. A payroll still computing PAYE on gross pay is overtaxing staff every month, and the employee carries that loss until someone notices.

The order, step by step

  • Start with gross pay: basic salary, allowances, and non-cash benefits worth more than KES 5,000 a month.
  • Deduct the employee's NSSF, SHIF and Housing Levy, plus any pension or post-retirement medical contributions within the limits above.
  • Apply the five bands to what remains.
  • Subtract personal relief of KES 2,400, and insurance relief if it applies — 15% of qualifying life, health or education premiums, up to KES 60,000 a year.
  • What is left is the PAYE you deduct and remit.

Net pay is then gross pay less NSSF, SHIF, the Housing Levy, PAYE and anything else the employee has agreed to, such as a SACCO or HELB deduction.

The other four, one by one

NSSF: the number that changed in February 2026

NSSF runs on two tiers, both charged at 6% from the employee and matched by the employer. What changes each year is not the rate but the earnings band it bites on.

Year 3, to January 2026Year 4, from February 2026
Lower earnings limit (Tier I)KES 8,000KES 9,000
Upper earnings limit (Tier II)KES 72,000KES 108,000
Maximum employee contributionKES 4,320KES 6,480
Maximum employer contributionKES 4,320KES 6,480
Maximum total per employeeKES 8,640KES 12,960

Tier I is 6% of pensionable pay up to KES 9,000, a maximum of KES 540 each way, and must go to NSSF. Tier II covers pay between KES 9,000 and KES 108,000, a maximum of KES 5,940 each way, and may be remitted to an approved private scheme instead under a contracting-out arrangement approved by the Retirement Benefits Authority.

For an employee on KES 50,000, nothing changed in February 2026 — 6% of KES 50,000 is KES 3,000 either way. For anyone above KES 72,000, the deduction jumped, and so did your matching cost. If your payroll still caps NSSF at KES 4,320, it is wrong.

SHIF: 2.75% of gross, no ceiling

The Social Health Insurance Fund replaced NHIF in October 2024 and is run by the Social Health Authority. It takes 2.75% of gross monthly pay, with a floor of KES 300 and no upper limit.

The floor catches low earners: 2.75% of KES 8,000 is KES 220, so the deduction is KES 300. The absence of a ceiling catches senior staff — on KES 400,000 the deduction is KES 11,000 a month, where the old NHIF band would have been KES 1,700.

Missing a month is not just a compliance problem. The employee loses cover.

Affordable Housing Levy: 1.5% from each side

Under the Affordable Housing Act, 2024, the employee pays 1.5% of gross monthly salary and the employer pays a matching 1.5%. There is no cap and no minimum. Both halves are remitted together to KRA within nine working days after the end of the month.

Employers who remit only the employee's half are among the most common cases we see. The liability for your half does not go away.

NITA levy: KES 50 a head

The industrial training levy is KES 50 per employee per month, paid entirely by you under the Industrial Training Act and remitted with the PAYE return. It is small enough to forget and specific enough to be noticed on review. Employers who send staff for training at NITA-approved institutions can claim reimbursement from the fund.

A worked payslip: KES 80,000 a month

Take a sales supervisor on a gross salary of KES 80,000, with no allowances, no pension beyond NSSF and no insurance relief.

StepWorkingKES
Gross pay80,000.00
Less NSSF6% of 80,0004,800.00
Less SHIF2.75% of 80,0002,200.00
Less Housing Levy1.5% of 80,0001,200.00
Taxable pay71,800.00
Tax on first 24,000at 10%2,400.00
Tax on next 8,333at 25%2,083.25
Tax on remaining 39,467at 30%11,840.10
Tax before relief16,323.35
Less personal relief2,400.00
PAYE13,923.35
Net pay80,000 less 4,800, 2,200, 1,200 and 13,923.3557,876.65

What the same employee costs you

Employer costKES
Gross salary80,000.00
NSSF employer share4,800.00
Housing Levy employer share1,200.00
NITA levy50.00
Total monthly cost86,050.00

The employee sees KES 57,877. You spend KES 86,050. The gap of KES 28,173 is worth knowing before you quote a salary, because staff negotiate on net pay and budgets are built on total cost.

The same calculation at three salary levels

KES 30,000KES 80,000KES 150,000
NSSF1,800.004,800.006,480.00
SHIF825.002,200.004,125.00
Housing Levy450.001,200.002,250.00
Taxable pay26,925.0071,800.00137,145.00
PAYE after relief731.2513,923.3533,526.85
Net pay26,193.7557,876.65103,618.15
Total employer cost32,300.0086,050.00158,780.00

Notice NSSF at KES 150,000: it stops at KES 6,480 because pensionable pay is capped at KES 108,000. SHIF and the Housing Levy keep climbing, because neither has a ceiling.

All of it — PAYE, NSSF, SHIF and the NITA levy — is due by the 9th of the following month, with the Housing Levy due within nine working days of month end. In practice, one deadline governs the whole cycle.

The employer's recurring checklist

Every month

  • ☐ Run payroll on the current rates, not last year's
  • ☐ Give every employee an itemised payslip, as the Employment Act requires
  • ☐ File the PAYE return on iTax by the 9th, including the NITA levy
  • ☐ Pay the PAYE due by the 9th
  • ☐ Remit NSSF Tier I and Tier II by the 9th
  • ☐ Remit SHIF to the Social Health Authority by the 9th
  • ☐ Remit both halves of the Housing Levy within nine working days of month end
  • ☐ Reconcile what you deducted against what you actually paid over, every month, before the next payroll run

That last line prevents most payroll disasters. Deductions that are taken but not remitted accumulate silently and surface during a KRA review, by which time the penalties have been running for months.

Every year

  • ☐ Issue P9 forms to all staff early enough for them to file
  • ☐ Check the February NSSF limits before running the February payroll
  • ☐ Reconcile the year's PAYE deductions to the twelve monthly returns
  • ☐ Review salaries against the current regulated minimum wage
  • ☐ Review employment contracts, leave records and any statutory service pay

The P9 point now matters more than it used to. From 1 January 2027, individual taxpayers file their returns by 30 April rather than 30 June, so a P9 that used to be fine in May is now late. Companies continue to file by the end of the sixth month after their year end.

When someone joins or leaves

  • ☐ Confirm the employee has a KRA PIN and add them to your PAYE records
  • ☐ Register them with NSSF and with the Social Health Authority
  • ☐ Apply the correct deductions from the first payslip, including part-month pay
  • ☐ On exit, calculate PAYE on terminal dues, leave pay and any service pay correctly
  • ☐ Remove them from the following month's returns so you are not paying for staff who have gone

What it costs to get PAYE wrong

KRA's penalties on PAYE are steeper than most employers expect.

FailurePenalty
Filing the PAYE return lateThe higher of 25% of the tax due or KES 10,000
Paying late5% of the tax due
Leaving tax unpaid1% interest per month or part month
Failing to deduct and account for taxThe higher of 25% of the tax involved or KES 10,000

NSSF and SHIF carry their own penalties, and unremitted SHIF suspends an employee's cover.

The pattern we see most often is not fraud. It is a business that grew past the point where one person could run payroll alongside everything else: a February NSSF change missed, SHIF computed on basic rather than gross, the employer's half of the Housing Levy never paid. Each is small in a month and substantial over a year.

Hand the calculation to someone who does it every month

Uwazi Consulting runs payroll for businesses that would rather spend the first week of the month selling than reconciling deductions. That means payslips, the monthly returns and remittances to KRA, NSSF and SHA by the 9th, rate changes applied the month they take effect, and a reconciliation you can actually check.

If your payroll is already behind, we can also work backwards: quantify the exposure, correct the returns and agree a way forward with KRA.

We are based in Nairobi and support employers across Kenya. Get in touch and tell us how many people you pay — that is usually all we need to quote.

See also our guides to accounting for small businesses and turnover tax.

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