Payroll

Payroll Compliance in Kenya: PAYE, SHIF, NSSF, and Housing Levy

How the four statutory deductions work in Kenya, how to calculate them, and what to file with KRA every month.

Gariclaim · · 3 min read

If you employ anyone in Kenya, four deductions come out of every paycheck. Three go to statutory bodies, one goes to the tax authority. Getting them wrong creates penalties that compound fast.

Here is how each one works.

PAYE (Pay As You Earn)

PAYE is income tax withheld from your employee’s salary and remitted to KRA on their behalf. You are the tax collector here, not the taxpayer.

PAYE is progressive. The first KES 24,000 a month is tax-free. From there the bands step up, topping out at 30 percent for income above KES 32,333 a month, plus a 5 percent surcharge on income over KES 500,000 a year.

Every employee also gets a personal relief of KES 2,400 a month, which reduces the tax calculated.

PAYE is filed on Form P10 and remitted by the 9th of the following month.

SHIF (Social Health Insurance Fund)

SHIF replaced NHIF in late 2024. It is calculated as 2.75 percent of gross salary, with a minimum of KES 300 a month. There is no upper cap.

SHIF is deducted from the employee and remitted to the Social Health Authority.

NSSF (National Social Security Fund)

NSSF is a pension contribution. It has two tiers:

  • Tier 1: 6 percent of pensionable pay up to the lower earnings limit
  • Tier 2: 6 percent of pensionable pay between the lower and upper earnings limits

Both the employee and the employer contribute. So NSSF effectively doubles the deduction from your perspective as an employer.

Housing Levy

The Affordable Housing Levy is 1.5 percent of gross salary, matched by the employer at another 1.5 percent. Total 3 percent of gross pay.

It was reintroduced in 2024 and remitted to KRA monthly alongside PAYE.

The monthly rhythm

Every month, by the 9th:

  • PAYE, SHIF, Housing Levy to KRA
  • NSSF to NSSF
  • Each employee gets a payslip

Miss the 9th and you accrue penalties. KRA charges 5 percent of the tax due plus 1 percent interest per month. NSSF charges similar.

Common mistakes

The three mistakes we see most often in Kenyan garages:

  1. Ignoring Housing Levy because “it might be repealed”. It has not been. Remit it.
  2. Using the old NHIF rates for SHIF. SHIF replaced it. Check your calculations.
  3. Deducting NSSF from the employee but not contributing the employer share. Both halves are required.

How Gariclaim helps

Gariclaim runs payroll daily, weekly, biweekly, or monthly. It calculates PAYE, SHIF, NSSF, and Housing Levy automatically, generates payslips for each employee, and produces the P10 and statutory schedules you submit to KRA and NSSF.

Leave management and salary advances are integrated, so deductions for advances or unpaid leave are applied correctly.

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