Kenyan Payroll Glossary 2026
Plain-English definitions of every Kenyan payroll term. PAYE, NSSF, SHIF, Housing Levy, NITA, taxable income, pensionable salary, and 30+ more, updated for 2026.
Statutory deductions
The five amounts that come off a Kenyan payslip every month.
Housing Levy
Affordable Housing Levy
1.5% from the employee plus a 1.5% employer match, funding the Affordable Housing Programme.
The Housing Levy is 1.5% of gross salary from the employee, matched by 1.5% from the employer. Total cost is 3% of gross. Since 27 December 2024 the employee's portion is deductible from taxable income before PAYE is calculated. Remitted via iTax by the 9th of the following month.
NITA
National Industrial Training Authority levy
A flat 50 KES per employee per month, paid by the employer only, funding industrial training.
NITA is the only Kenyan statutory deduction that the employee never sees. It is a flat 50 KES per employee per month, paid entirely by the employer, and funds national industrial training and skills development. Remitted via the NITA portal by the 10th of the following month.
NSSF
National Social Security Fund
Compulsory retirement contributions, 6% from the employee with a 6% employer match.
NSSF is Kenya's national pension scheme. The contribution is 6% of pensionable salary from the employee, matched by 6% from the employer. The salary base is split into two tiers, each capped, so the maximum contribution from each side is 6,480 KES per month (as of February 2026). Remitted via the NSSF portal by the 15th of the following month.
PAYE
Pay As You Earn
Income tax deducted from employee salaries each month and remitted to KRA.
PAYE is the system Kenya uses to collect income tax from employed people. The employer calculates the tax, deducts it from each paycheck, and remits it to the Kenya Revenue Authority by the 9th of the following month. The amount depends on the employee's taxable income and the current tax bands.
Example: An employee with a taxable income of 71,800 KES pays roughly 13,923 KES in PAYE after the 2,400 KES personal relief.
SHIF
Social Health Insurance Fund
Health insurance contribution of 2.75% of gross salary, employee-only, with a 300 KES minimum.
SHIF replaced NHIF in October 2024. The contribution is 2.75% of gross salary, paid entirely by the employee with no employer match. The minimum monthly contribution is 300 KES and there is no upper cap. Remitted through the eCitizen / SHA portal by the 9th of the following month.
Example: An employee earning 80,000 KES contributes 2,200 KES to SHIF each month. The employer contributes nothing.
Pay concepts
Gross, net, taxable income and what they actually mean.
Gross salary
The total salary before any deductions.
Gross salary is the headline figure in a contract or job offer. It includes basic salary plus any fixed allowances. Variable elements like bonuses and overtime are usually shown separately on the payslip but added into gross for the month they are paid.
Insurance relief
15% of private health insurance premiums, capped at 5,000 KES per month, deductible from PAYE.
Insurance relief applies only to private health insurance premiums (separate from SHIF). The employee claims 15% of the premium amount, up to a 5,000 KES per month maximum. It is subtracted from the calculated PAYE, not from gross salary.
Net pay
What lands in the employee's account or M-Pesa after all deductions. Also called take-home or net salary.
Net pay is gross salary minus all statutory deductions (PAYE, NSSF, SHIF, Housing Levy) and any other deductions on the payslip (pension top-ups, HELB repayments, salary advances). It is the figure the employee actually receives. Net pay is always smaller than gross, often by 25–35% for mid-range salaries.
Pensionable salary
The portion of pay subject to NSSF contributions. In practice, gross monthly pay up to the NSSF cap.
Pensionable salary is the base used to calculate NSSF contributions. For most employees it equals gross monthly pay. The salary base is capped at 108,000 KES (February 2026), so for any pay above that the 6% NSSF rate stops applying.
Personal relief
A flat 2,400 KES per month that comes off calculated PAYE for every resident taxpayer.
Personal relief is applied after calculating tax from the bands, not before. Every resident Kenyan taxpayer gets it automatically. The annual figure is 28,800 KES (12 × 2,400). If the calculated tax is below 2,400 KES, the employee pays no PAYE.
Statutory deduction
A deduction the employer is legally required to take. In Kenya: PAYE, NSSF, SHIF, Housing Levy, NITA.
Statutory deductions are non-negotiable and apply to every employee meeting the relevant thresholds. The employer collects them on behalf of government bodies and remits them to the right portal by the right deadline. Other payslip deductions like pension top-ups, salary advances, or HELB repayments follow their own rules.
Taxable income
Gross salary minus statutory deductions, used as the base for calculating PAYE.
PAYE does not apply to gross salary directly. It applies to taxable income, which is gross minus the employee's NSSF contribution, SHIF contribution and Housing Levy contribution. Skipping that subtraction is the single most common payroll bug we see.
Rates and tiers
Tax bands, NSSF tiers, and how the brackets work.
Effective tax rate
Total tax as a percentage of gross salary. Always lower than the top band rate.
Effective tax rate divides the actual PAYE paid by gross salary. An employee in the 30% band does not pay 30% of their salary in tax, because only the slice above 32,333 KES is taxed at 30%. The lower bands and personal relief pull the effective rate down significantly.
Tax band
also called tax bracket
A salary range that attracts a specific PAYE rate. Kenya currently uses five bands.
PAYE is progressive: different slices of taxable income are taxed at different rates. The 2026 bands are 10% on the first 24,000 KES, 25% on the next 8,333 KES, 30% on the next chunk up to 500,000 KES, then 32.5% to 800,000 KES, then 35% above. Each slice only pays the rate for its own band.
Tier I (NSSF)
The first 9,000 KES of pensionable salary, contributed to NSSF at 6%. Maximum: 540 KES per side.
NSSF contributions are split into two tiers. Tier I covers the first 9,000 KES of pensionable salary. The employee contributes 6% (540 KES) and the employer matches with another 540 KES. For an employee earning less than 9,000 KES, all of NSSF is Tier I.
Tier II (NSSF)
Pensionable salary above 9,000 KES up to 108,000 KES. Maximum: 5,940 KES per side.
Tier II covers the slice of pensionable salary from 9,001 KES to 108,000 KES. The 6% rate is the same; only the band is different. An employee earning 80,000 KES contributes 540 (Tier I) + 4,260 (Tier II) = 4,800 KES total to NSSF.
Compliance documents
The two forms every Kenyan employer has to deal with.
P10 form
The monthly employer return that summarises all PAYE deducted from all employees.
P10 is the form (now filed through iTax as a CSV) that an employer submits each month showing every employee's PAYE deduction. It is the document the KRA matches against actual remittance to spot under-deductions or missing employees.
P9 form
The annual tax certificate the employer issues to each employee summarising the year's PAYE.
The P9 lists gross pay, allowances, deductions and PAYE for each month of the tax year. Employees use it to file their individual annual returns on iTax. Employers must issue it by the end of February for the previous calendar year.
Payroll process
The mechanics of running monthly payroll.
Bulk pay
Paying many employees at once, typically via M-Pesa B2C or bank file upload. Saves time vs individual transfers.
Bulk pay is how Kenyan SMEs typically settle monthly payroll. The employer uploads a single file (CSV or via the M-Pesa portal) listing employees and amounts, and the system disburses everything in one batch. Saves hours compared to individual M-Pesa send-money transactions.
Pay period
The interval covered by one payroll run. Monthly is standard in Kenya; some industries use weekly or bi-weekly.
Pay period defines what work the payment covers. Monthly is by far the most common in Kenya. Construction and some hospitality businesses use weekly pay periods, which complicates statutory deductions (which are still calculated monthly).
Payroll
The end-to-end process of paying employees for a period, including calculation, deduction, payment and filing.
Payroll is more than running the math. It includes calculating gross pay, applying statutory deductions, generating payslips, paying salaries, and filing returns with KRA, NSSF, SHA and NITA. Most Kenyan SMEs run payroll monthly.
Payslip
The itemised statement an employer must issue with each salary payment. Required by Section 20 of the Employment Act.
A valid payslip lists gross wages, variable elements (overtime, bonuses, commissions), statutory deductions itemised, net pay, and payment method. A WhatsApp message saying the amount is not a payslip. A one-line Excel printout with just net pay is not a payslip.
Remittance
The act of paying a deducted amount to the relevant authority. PAYE is remitted to KRA, NSSF to the fund, and so on.
Deducting an amount from a salary and sending it to the relevant body are two separate acts. The deduction happens on payroll day; the remittance happens by the filing deadline (the 9th, 10th or 15th depending on the deduction).
Employment types
How the law treats different worker categories.
Casual worker
An employee engaged for a period not exceeding 24 hours at a time. Still subject to most statutory deductions.
Casual workers are paid at the end of each day or shift. They are still entitled to a payslip under Section 20 and the employer must still apply statutory deductions where the income thresholds are met. The Employment Act provides that a casual worker engaged continuously for more than a month becomes a regular employee.
Permanent employee
An employee on an open-ended contract with full statutory benefits.
Permanent employees are entitled to leave, sick pay, notice periods, and other Employment Act protections. From a payroll perspective they are the cleanest case: full statutory deductions, monthly payslip, P9 at year end.
Pro-rata pay
Salary calculated for a partial pay period. Used when an employee joins or leaves mid-month.
Pro-rata pay divides the monthly salary by the number of working days in the month, then multiplies by the days actually worked. Statutory deductions are calculated on the pro-rata gross, not the full monthly figure.
Section 20 (Employment Act)
The Employment Act provision that requires employers to issue an itemised payslip with every salary payment.
Section 20 lists what a payslip must contain: gross wages, variable elements separately, statutory deductions itemised, net pay, and payment method. Failure to issue a compliant payslip is a civil liability and creates exposure during labour disputes.
Penalties and recovery
What happens when something goes wrong.
Back-payment
The amount an employer owes when a KRA audit finds historical under-deduction. Recovered from the employer, not the employee.
If KRA discovers that PAYE has been under-deducted in past periods, the shortfall is recovered from the employer, plus retroactive penalties. The employee is not asked to return wages already paid. Audits can look back several years.
Interest (on unpaid tax)
A monthly charge that accrues while a tax balance remains unpaid. For PAYE: 1% per month.
Interest accrues on top of any late filing penalty until the balance is settled. Under the Tax Procedures Act, the rate is a simple 1% per month on the unpaid amount, with no cap on how long it can keep adding up. Four months of letting a PAYE balance sit can easily triple the original penalty.
Late filing penalty
The flat charge that hits the moment a deduction is filed or paid after its deadline.
PAYE: 2% of tax due, applied immediately the filing is late. NSSF: 5% of the amount due per month of delay. NITA: 5% per month on the outstanding amount. SHIF: framework still finalising in 2026 but enforcement is active. Penalties are separate from interest and from the original tax due.
Penalty waiver
A discretionary KRA process to reduce or cancel a penalty, granted when the delay was outside the employer's control.
A waiver application requires demonstrating that the cause of the delay was beyond the employer's control (system outage, natural disaster, illness of the responsible person). Approval is at KRA's discretion and far from guaranteed. Budget for the full penalty and treat any waiver as a refund.