Payroll Management Guide
A comprehensive guide to managing payroll in Kenya, including all deductions, compliance requirements, and best practices for employers.
PAYE (Pay As You Earn)
PAYE is the primary income tax deduction for employees in Kenya. It's calculated on a progressive basis, meaning higher earners pay a higher percentage of tax.
Tax Bands (2024)
| Income Range | Tax Rate |
|---|---|
| First KES 288,000 per year | 10% |
| Next KES 100,000 per year | 25% |
| Remaining amount | 30% |
Personal Relief
Every employee is entitled to a personal relief of KES 2,880 per month (KES 34,560 per year). This reduces taxable income before calculating PAYE.
Example Calculation
For an employee earning KES 50,000 per month (KES 600,000 per year):
NSSF Contributions
The National Social Security Fund (NSSF) provides retirement benefits for employees. Both employer and employee contribute 6% each.
Contribution Tiers
Tier 1
Applies to the first KES 6,000 of gross salary
Employee contribution: 6% of KES 6,000 = KES 360/month (maximum)
Tier 2
Applies to salary between KES 6,001 and KES 18,000
Employee contribution: 6% of KES 18,000 = KES 1,080/month (maximum)
Important: Employers must match employee contributions. The total NSSF contribution (employee + employer) is 12% of the applicable tier amount.
NHIF Contributions
The National Hospital Insurance Fund (NHIF) provides health insurance coverage. Contributions are based on salary brackets.
Contribution Rates (2024)
| Gross Salary Range | Monthly Contribution |
|---|---|
| KES Up to 5,999 | KES 150 |
| KES 6,000 - 7,999 | KES 300 |
| KES 8,000 - 11,999 | KES 400 |
| KES 12,000 - 14,999 | KES 500 |
| KES 15,000 - 19,999 | KES 600 |
| KES 20,000 - 24,999 | KES 750 |
| KES 25,000 - 29,999 | KES 850 |
| KES 30,000 - 34,999 | KES 900 |
| KES 35,000 - 39,999 | KES 950 |
| KES 40,000 - 44,999 | KES 1,000 |
| KES 45,000 - 49,999 | KES 1,100 |
| KES 50,000 - 59,999 | KES 1,200 |
| KES 60,000 - 69,999 | KES 1,300 |
| KES 70,000 - 79,999 | KES 1,400 |
| KES 80,000 - 89,999 | KES 1,500 |
| KES 90,000 - 99,999 | KES 1,600 |
| KES 100,000 and above | KES 1,700 |
Housing Levy
The Affordable Housing Levy is a mandatory 1.5% deduction from gross salary, introduced to fund affordable housing projects in Kenya.
Calculation
Housing Levy = 1.5% × Gross Salary
Example: For a gross salary of KES 50,000, the housing levy is KES 750 per month.
Note: The Housing Levy is mandatory for all employees. Employers must deduct and remit this amount to KRA.
HELB Deductions
Higher Education Loans Board (HELB) deductions are made for employees who have outstanding student loans. These deductions are made after all tax deductions.
Important: HELB is NOT Tax Deductible
HELB repayments are deducted from net salary (after PAYE, NSSF, NHIF, and Housing Levy), not from gross salary. This means HELB deductions do not reduce taxable income.
Payslips & Certificates
Employers must provide payslips to employees and generate annual certificates for tax filing.
Monthly Payslips
Every employee must receive a payslip showing:
- Gross salary
- All deductions (PAYE, NSSF, NHIF, Housing Levy, HELB)
- Net salary
- Year-to-date totals
P9 Certificate
The P9 certificate is issued to each employee at the end of the tax year (by January 31st). It shows:
- Total gross salary for the year
- Total PAYE deducted
- Total NSSF, NHIF, and Housing Levy contributions
- Personal relief claimed
P10 Certificate
The P10 is the employer's summary certificate showing total PAYE remitted for all employees during the tax year.
Compliance Requirements
Employer Obligations
- Deduct PAYE, NSSF, NHIF, and Housing Levy from employee salaries
- Match NSSF contributions (employer portion)
- Remit all deductions to KRA by the 9th of the following month
- Provide payslips to all employees monthly
- Issue P9 certificates by January 31st
- Maintain accurate payroll records
Filing & Deadlines
Monthly Filing
Employers must remit PAYE, NSSF, NHIF, and Housing Levy deductions to KRA by the 9th day of the month following the payroll month.
Annual Filing
P9 certificates must be issued to all employees by January 31st of the year following the tax year.
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