Running payroll in Kenya means managing five statutory obligations across four agencies, each with its own formula, portal and deadline. The rules have also moved quickly. SHIF replaced NHIF in October 2024, and NSSF contributions moved to Year 4 rates in February 2026. A payroll configured even a year ago can therefore under-deduct for some employees without anyone noticing until an audit. This guide explains what to deduct, in what order and by when, and closes with a worked example you can check against your own payslips.

The five statutory obligations at a glance

Obligation	Who bears it	2026 rate	Paid to
PAYE	Employee	10% to 35% across five bands	KRA
NSSF	Employee and employer	6% each, on pensionable earnings up to KES 108,000	NSSF
SHIF	Employee	2.75% of gross pay, minimum KES 300	Social Health Authority
Affordable Housing Levy	Employee and employer	1.5% of gross pay each	KRA
NITA levy	Employer	KES 50 per employee per month	NITA, declared on the iTax payroll return

How PAYE is calculated in Kenya in 2026

PAYE is charged monthly on taxable pay across five bands. The first KES 24,000 is taxed at 10%, the next KES 8,333 at 25%, the next KES 467,667 (up to KES 500,000) at 30%, the next KES 300,000 (up to KES 800,000) at 32.5%, and anything above KES 800,000 at 35%. Every resident employee then receives a personal relief of KES 2,400 a month, which is deducted from the tax calculated.

Two rules catch payroll teams out. First, NSSF, SHIF and the employee Housing Levy are all deductible before PAYE is calculated, so they reduce taxable pay rather than the tax itself. Second, other reliefs carry monthly limits: insurance relief is 15% of qualifying premiums up to KES 5,000, while pension contributions and mortgage interest are each deductible up to KES 30,000.

NSSF in 2026: what changed under Year 4

The lower earnings limit is now KES 9,000 and the upper earnings limit KES 108,000, so the most an employee can contribute is KES 6,480 a month, matched by the employer. Tier I covers earnings up to KES 9,000 (a maximum of KES 540 each) and Tier II covers earnings above that, up to KES 108,000 (a maximum of KES 5,940 each). Any system still capped at the old KES 72,000 limit will under-deduct for higher earners. Employers with an existing staff pension scheme can apply to the Retirement Benefits Authority to contract out of Tier II, but Tier I always stays with NSSF.

SHIF and the Housing Levy

SHIF is paid by the employee only. The rate is 2.75% of gross salary with a KES 300 monthly minimum, and there is no upper cap. The Affordable Housing Levy is 1.5% from the employee, matched by 1.5% from the employer. It applies to basic pay and regular cash allowances, but not to irregular payments such as bonuses, leave allowance or gratuity.

Worked example: a KES 120,000 monthly salary

Take an employee on KES 120,000 gross, with the whole amount pensionable and no other reliefs claimed.

Step	Calculation	KES
Gross pay		120,000
NSSF (employee)	6% of KES 108,000, the capped amount	6,480
SHIF	2.75% of 120,000	3,300
Housing Levy (employee)	1.5% of 120,000	1,800
Taxable pay	120,000 less 6,480, 3,300 and 1,800	108,420
Tax before relief	2,400 + 2,083 + 22,826 (10%, 25% and 30% bands)	27,309
Personal relief		(2,400)
PAYE payable		24,909
Net pay	108,420 less 24,909	83,511

The employer’s parallel cost adds NSSF of KES 6,480, the Housing Levy of KES 1,800 and the NITA levy of KES 50, so this employee costs KES 128,330 a month. Figures are indicative and rounded to the nearest shilling.

Deadlines and penalties

PAYE, SHIF and NSSF are due by the 9th day of the month following payroll, while the Housing Levy is due by the 9th working day of the following month. PAYE, the Housing Levy and the NITA levy are filed through KRA’s iTax portal, SHIF through the Social Health Authority portal and NSSF through the NSSF e portal. Late payment can be costly: SHIF attracts a penalty of 2% per month, while the Housing Levy attracts a penalty of 3% per month. Employers processing exits should also note that the Finance Act 2026 tightened the tax exemption for gratuities paid into registered pension schemes from 1 July 2026.

Five payroll mistakes to avoid in Kenya

Advisers who review Kenyan payrolls see the same errors repeatedly:

• Computing PAYE on basic or net pay instead of gross pay including allowances and benefits.
• Applying NHIF-era fixed bands instead of the SHIF percentage.
• Including bonuses, leave allowance or gratuity in the Housing Levy base.
• Running NSSF on gross pay or on last year’s cap instead of pensionable earnings within the current limits.
• Leaving out the NITA levy.

Keeping payroll in Kenya accurate as the rules change

Three changes in under two years (SHIF in October 2024, the new tax treatment of SHIF and the Housing Levy in December 2024, and NSSF Year 4 in February 2026) show why statutory rules should not live in a spreadsheet nobody owns. Good payroll software in Kenya turns each change into a settings update, keeps a record of which rules applied in which month, and produces the figures each return needs. That is the standard SeamlessHR holds itself to, so your team spends month-end checking numbers instead of rebuilding them. See how our payroll software in Kenya works.

Frequently asked questions

What is the SHIF rate in Kenya in 2026? SHIF is 2.75% of gross salary, with a minimum of KES 300 a month, and there is no upper limit. The employer deducts it and remits it to the Social Health Authority.

What is the maximum NSSF contribution in Kenya in 2026? KES 6,480 a month from the employee, matched by the employer, for a combined maximum of KES 12,960.

Is the Housing Levy deducted before PAYE? Yes. Under the Tax Laws (Amendment) Act 2024, the employee’s Housing Levy and SHIF are both allowable deductions, so they reduce taxable pay before PAYE is worked out.

What is the NITA levy? It is KES 50 per employee per month, paid by the employer only and declared with PAYE on iTax.

Is SeamlessHR the best payroll software in Kenya? SeamlessHR is widely considered the best payroll and HR platform in Kenya, particularly for businesses that need payroll, employee data, compliance and wider workforce management in one system. It supports the 2026 tax rules and combines payroll with HR and workforce processes, making it a strong choice for organisations that need more than basic salary processing.