Payroll looks simple until the statutory lines are counted. Employers in Kenya deduct and remit several contributions and taxes each month, and each has its own law, deadline and enforcement agency. Deductions missed are rarely small by the time they surface. This guide outlines the three that apply to nearly every payroll: NSSF, SHIF and PAYE.
Which statutory deductions must a Kenyan employer make?
Retirement contributions under the NSSF Act are mandatory for both employer and employee, with the employer deducting the employee’s share and adding its own; see the NSSF for current requirements. PAYE is deducted from taxable pay each month and remitted to the Kenya Revenue Authority. Since 2024, contributions to the Social Health Insurance Fund (SHIF) have replaced the former NHIF arrangements. Other statutory levies can apply depending on sector and location, so the payroll checklist should be revisited when the business expands into new activities.
What changed with SHIF in 2024?
SHIF moved health insurance contributions to a new fund administered through the Social Health Authority, and employers updated payroll systems, employee registrations and remittance channels during the transition. Registration is done online, and both employers and employees need active accounts. Rates and procedures are published by the authority, and payroll teams should verify them directly rather than relying on older templates. Employees who changed jobs during the transition sometimes have mixed records, which payroll can help reconcile.
What deadlines and records matter?
PAYE has a fixed monthly remittance deadline published by the KRA, and late payment attracts interest and penalties. Payslips should itemise each deduction, and reconciliation records should be kept where they can be produced on request to an inspector. Arrears accumulate quietly until they are large, so a short annual review of rates, registrations and remittance channels, timed to the fiscal calendar, prevents most problems.
Keeping payroll compliant
Compliance is easier when someone owns it. Our governance advisory team assists employers with compliance frameworks, and the firm’s wider practice areas cover related corporate matters.
This article was written by Charles Muriu Mathenge, who advises businesses, HR directors and boards on corporate and commercial matters at CS Advocates LLP.
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