How to run payroll in Kenya: PAYE, NSSF, SHIF, and Housing Levy explained
Every month, thousands of Kenyan employers get payroll wrong. Not because they don’t care — but because nobody ever explained it clearly.
This is that explanation.
The four deductions every Kenyan employer must make
When you pay an employee in Kenya, four things come off their gross salary before they see a shilling. You are legally required to deduct them and remit them to the right government bodies.
1. PAYE — Pay As You Earn
PAYE is income tax. It’s calculated on a sliding scale — the more your employee earns, the higher the percentage deducted.
The current tax bands (2024/2025):
| Monthly taxable income (KES) | Tax rate |
|---|---|
| 0 – 24,000 | 10% |
| 24,001 – 32,333 | 25% |
| 32,334 – 500,000 | 30% |
| 500,001 – 800,000 | 32.5% |
| Above 800,000 | 35% |
Every employee also gets a personal relief of KES 2,400 per month, which reduces the PAYE they actually pay.
So for an employee earning KES 40,000 gross:
- First KES 24,000 taxed at 10% = KES 2,400
- Remaining KES 16,000 taxed at 25% = KES 4,000
- Total tax before relief = KES 6,400
- Minus personal relief = KES 4,000 PAYE
PAYE is filed and paid via iTax by the 9th of the following month.
2. NSSF — National Social Security Fund
NSSF is a pension contribution. Under the 2023 NSSF Act (currently in and out of courts, but widely applied):
- Employee contributes 6% of gross salary
- Employer contributes another 6%
- Both contributions are capped at a combined KES 2,160 each (i.e., KES 2,160 from employee, KES 2,160 from employer) for salaries above KES 36,000
For employees earning less than KES 36,000, the calculation is tiered. For most practical purposes: if gross salary is KES 36,000 or above, deduct KES 2,160 from the employee and add KES 2,160 from yourself.
NSSF is remitted by the 15th of the following month via the NSSF employer portal.
3. SHIF — Social Health Insurance Fund
SHIF replaced NHIF in October 2024. It is 2.75% of gross salary with no upper cap.
An employee earning KES 50,000 contributes KES 1,375 per month. Unlike NHIF’s flat rate, SHIF scales with income.
Unlike PAYE and NSSF, SHIF has no employer contribution — it is employee-only. You deduct it from gross salary and remit it.
SHIF is remitted via SHA (Social Health Authority) portal by the 9th of the following month.
4. Housing Levy
Introduced in 2023. Both employee and employer each contribute 1.5% of gross salary.
For an employee earning KES 50,000:
- Employee deduction: KES 750
- Employer contribution: KES 750
- Total remitted to the Housing Fund: KES 1,500
Housing Levy is remitted via KRA (eTIMS is not involved — this is a separate filing) by the 9th of the following month.
Putting it together: an example
Employee gross salary: KES 60,000
| Deduction | Amount (KES) |
|---|---|
| PAYE | ~KES 7,200 |
| NSSF (employee) | KES 2,160 |
| SHIF | KES 1,650 |
| Housing Levy (employee) | KES 900 |
| Total deductions | ~KES 11,910 |
| Employee take-home | ~KES 48,090 |
Your additional cost as employer:
- NSSF employer: KES 2,160
- Housing Levy employer: KES 900
- Total employer top-up: KES 3,060
So hiring someone at KES 60,000 gross actually costs you KES 63,060 per month all-in.
The filing calendar
| Obligation | Due date | Filed via |
|---|---|---|
| PAYE | 9th of following month | KRA iTax |
| SHIF | 9th of following month | SHA portal |
| Housing Levy | 9th of following month | KRA eTIMS/portal |
| NSSF | 15th of following month | NSSF employer portal |
Miss any of these and the penalties stack up fast. PAYE late payment attracts a 5% penalty on the outstanding amount plus 1% interest per month.
The honest problem with manual payroll
Most Kenyan employers calculate payroll in Excel. Some use WhatsApp to collect employee bank details. A few still use pen and paper.
The problem is not that the math is hard — it’s that it’s easy to make one small mistake and apply it to 20 employees for 12 months before anyone notices.
A proper payroll system calculates PAYE, NSSF, SHIF, and Housing Levy automatically. It produces payslips your employees can reference. It generates the P9 form your employees need for their personal tax returns at year end. And it creates the return file you upload directly to iTax — no re-keying.
Running payroll should take 30 minutes once a month, not two days.
If you want to see how automated payroll works inside a full business system, see what’s on our platform. Or if you want to talk through your specific situation, book a call.
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