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.
Current PAYE Bands
| Income Range | Tax Rate |
|---|---|
| First KES 24,000 per month | 10% |
| Next KES 8,333 per month | 25% |
| Next KES 467,667 per month | 30% |
| Next KES 300,000 per month | 32.5% |
| Balance above KES 800,000 per month | 35% |
Personal Relief
Every employee is entitled to a personal relief of KES 2,400 per month (KES 28,800 per year). This is a tax credit applied after PAYE has been computed.
Example Calculation
For an employee earning KES 50,000 per month:
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.
SHIF / Health Contributions
Kenya's payroll health deduction landscape has shifted from NHIF-led messaging to SHIF and related health contributions. Use the current amount on the employee payslip or the latest official payroll notice when preparing payroll.
Practical Guidance
- Use the current SHIF or health deduction shown on the employee payslip or official schedule.
- Do not rely on the retired NHIF bracket table for new payroll setup.
- Keep evidence of the health contribution used in payroll for reconciliation.
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 employees. It is deducted at 1.5% of gross salary and is deductible in arriving at taxable pay for PAYE purposes.
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, SHIF or other health deductions, 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, SHIF or health deduction, 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, health contributions, and Housing Levy deductions
- 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, health contributions, and Housing Levy from employee salaries
- Match NSSF contributions (employer portion)
- Remit PAYE and Housing Levy to KRA by the 9th of the following month and meet the separate deadlines for NSSF and health remittances
- Provide payslips to all employees monthly
- Issue P9 certificates by January 31st
- Maintain accurate payroll records
Filing & Deadlines
Monthly Filing
Employers must remit PAYE and Housing Levy to KRA by the 9th day of the month following the payroll month. NSSF and health remittances follow their own respective schemes and deadlines.
Annual Filing
P9 certificates must be issued to all employees by January 31st of the year following the tax year.
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