Ke Payroll Paye Nssf Shif Ahl

---
name: ke-payroll-paye-nssf-shif-ahl
description: "Kenyan employer payroll for the 2026 year of income: PAYE under section 37 and the Third Schedule of the Income Tax Act (Cap. 470), NSSF pension contributions under the NSSF Act 2013 (Year 4 rates from February 2026), the Social Health Insurance Fund (SHIF) deduction, and the Affordable Housing Levy (AHL). Covers the 10% to 35% bands, the KShs 2 400 monthly personal relief, insurance relief, pre-tax deductions, NSSF Tier I and Tier II with the 9 000 and 108 000 limits, SHIF at 2.75% with the KShs 300 minimum, AHL at 1.5% plus 1.5%, the ninth-day deadlines, and late penalties and interest. Trigger on: Kenya PAYE, Kenya payroll, NSSF Tier II 2026, SHIF deduction, housing levy, P10 return, net pay Kenya, personal relief Kenya. Out of scope: self-employed SHIF and NSSF (ke-nhif-nssf), individual returns (ke-income-tax), NITA levy, benefits valuation."
license: "AGPL-3.0-or-later (code) / OpenAccountants Guide License v1.0 (content)"
metadata:
  source: openaccountants
  openaccountants_url: "https://www.openaccountants.com/skills/ke-payroll-paye-nssf-shif-ahl"
  jurisdiction: "KE"
  tax_year: "2026"
  last_updated: "2026-11-02"
---

# Kenyan payroll: PAYE, NSSF, SHIF and the Affordable Housing Levy (2026)

Four monthly deductions sit on every Kenyan payslip. Each is set by its own law:

- **PAYE:** income tax withheld from emoluments. The employer deducts and accounts for it under the Income Tax Act (Cap. 470) s37, using the rates in the Third Schedule. The Kenya Revenue Authority (KRA) collects it through iTax.
- **NSSF:** 6% from the employee plus 6% from the employer, on pensionable earnings, under the National Social Security Fund Act 2013 s20 and its Third Schedule.
- **SHIF:** 2.75% of gross salary from the employee, with no employer match. It is set by the Social Health Insurance Act 2023 s27 and the Social Health Insurance Regulations 2024 (LN 49 of 2024) reg 17.
- **AHL:** the Affordable Housing Levy, 1.5% from the employee plus 1.5% from the employer, under the Affordable Housing Act 2024 ss4–5.

Together these cover the payroll (PR) and social contribution (SC) domains for employees.

**Tax year.** Kenya's year of income is the calendar year. This skill uses the Income Tax Act as consolidated to 1 July 2026, which includes the Finance Act 2026 (Act No. 19 of 2026). The individual bands in Head B para 1 of that consolidation are the same bands KRA has applied since 1 July 2023. NSSF uses the Year 4 rates in force from February 2026.

## Who this applies to

- **PAYE:** every employer paying emoluments to an employee, resident or not (ITA s37(1); KRA PAYE page). Emoluments include salary, wages, fees, commissions, bonuses, directors' fees, overtime and leave pay. They also include non-cash benefits above the KShs 5 000 a month threshold (KRA PAYE page). The employer must give each employee every deduction, relief and exemption the Act allows (s37(1A)).
- **NSSF:** every employer, for each employee (NSSF Act s20(1)). An employer may contract out Tier II to a registered occupational scheme that meets the reference scheme test (s21 and the Fourth Schedule).
- **SHIF:** liable persons are every Kenyan household; non-Kenyans ordinarily resident for more than 12 months; national and county governments; and any other employer (SHI Act s27(1)). For a salaried household, the employer makes the deduction from wages (s27(2)(a); reg 17).
- **AHL:** every employee's gross salary, plus an equal employer amount (AH Act ss4(2)(a), 5(1)). The levy on other gross income applies only to income not already subject to the salary levy (s4(2)(b)), and an employer that complies with s5 is not liable to the levy under s4(2)(b) (s5(2)). The Treasury may exempt income or persons by Gazette notice (s6).

Not covered here, refer to a specialist:

- self-employed SHIF and NSSF (see ke-nhif-nssf);
- casual and piece-rate workers;
- how to value housing, car and loan benefits, beyond the thresholds below;
- the NITA industrial training levy;
- tax treaties for short-term foreign employees;
- terminal dues and the tax on lump sums.

## Rates, bands and thresholds

**PAYE bands** (ITA Third Schedule Head B para 1, as amended to Act No. 19 of 2026; the monthly equivalents are KRA's):

| Annual band (KShs) | Monthly band (KShs) | Rate | Source |
|---|---|---|---|
| first 288 000 | first 24 000 | 10% | [ITA Third Sch. Head B para 1](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| next 100 000 | next 8 333 | 25% | same |
| next 5 612 000 | next 467 667 | 30% | same |
| next 3 600 000 | next 300 000 | 32.5% | same |
| over 9 600 000 | over 800 000 | 35% | same |

| Item | Amount | Source |
|---|---|---|
| Personal relief (resident individuals) | KShs 28 800 a year / 2 400 a month | [ITA Third Sch. Head A para 1; KRA PAYE page](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| Insurance relief | 15% of premiums, max KShs 60 000 a year | [ITA Third Sch. Head A para 2](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| Pension / provident contribution deduction | lesser of the contributions, 30% of pensionable income, and KShs 360 000 a year (30 000 a month of service) | [ITA s22A(1)](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| Post-retirement medical fund contribution | deductible up to KShs 15 000 a month | [ITA s15(2)(ad)](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| SHIF contribution | deductible | [ITA s15(2)(ae)](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| AHL deducted from the employee | deductible | [ITA s15(2)(ac)](https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01) |
| Non-cash benefits | taxable above KShs 5 000 a month (60 000 a year); meals up to 5 000 a month not taxable | [KRA PAYE page](https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye) |
| NSSF rate | 6% employee + 6% employer of pensionable earnings | [NSSF Act s20(1)](https://new.kenyalaw.org/akn/ke/act/2013/45/eng@2022-12-31) |
| NSSF Lower Earnings Limit (Tier I), from February 2026 | KShs 9 000; max 540 each side | [NSSF Act Third Sch. (Year 4); NSSF notice Feb 2026](https://www.nssf.or.ke/notice-to-employers-year-4-2026-nssf-contribution-rates) |
| NSSF Upper Earnings Limit (Tier II), from February 2026 | KShs 108 000; Tier II base up to 99 000; max 5 940 each side | [NSSF notice Feb 2026; KRA NSSF calculator](https://www.nssf.or.ke/notice-to-employers-year-4-2026-nssf-contribution-rates) |
| NSSF maximum per employee per month | KShs 12 960 (6 480 employee + 6 480 employer) | [NSSF notice Feb 2026](https://www.nssf.or.ke/notice-to-employers-year-4-2026-nssf-contribution-rates) |
| SHIF | 2.75% of gross salary or wage, minimum KShs 300 a month; employee only | [SHI Regulations 2024 reg 17(1)–(2)](https://new.kenyalaw.org/akn/ke/act/ln/2024/49/eng@2025-02-28) |
| AHL | 1.5% of gross salary from the employee + 1.5% from the employer | [AH Act ss4(2)(a), 5(1)](https://new.kenyalaw.org/akn/ke/act/2024/2/eng@2026-07-01) |

## The taxable base

1. **Gross pay.** All cash emoluments, plus taxable non-cash benefits above the KShs 5 000 monthly threshold.
2. **NSSF (employee share).**
   - Tier I: 6% of earnings up to the Lower Earnings Limit.
   - Tier II: 6% of earnings between the Lower and Upper Earnings Limits.
   - Pensionable earnings are the lower of monthly wages and the Upper Earnings Limit (NSSF Act s2). The employer adds an equal amount. KRA treats the employee NSSF contribution as a pre-tax deduction (KRA NSSF calculator).
3. **SHIF.** 2.75% of gross salary, but at least KShs 300. There is no ceiling (reg 17).
4. **AHL (employee share).** 1.5% of gross salary, with no ceiling (AH Act s4(2)(a)).
5. **Taxable pay.** Gross pay less:
   - the employee's NSSF;
   - SHIF (s15(2)(ae));
   - the employee's AHL (s15(2)(ac));
   - other registered pension or provident contributions, within the s22A(1) cap;
   - post-retirement medical fund contributions, up to KShs 15 000 a month (s15(2)(ad)).
6. **Tax.** Apply the monthly bands, then subtract the KShs 2 400 personal relief and any insurance relief. The result cannot go below zero.

The employer is responsible for getting these deductions and reliefs right (s37(1A)).

## Deadlines and filing

| Obligation | When | Source |
|---|---|---|
| Remit PAYE and file the monthly PAYE return on iTax (a nil return if there is no PAYE) | by the 9th day of the following month | KRA PAYE page; ITA s37(5) (time limit set by rules under s130) |
| Pay NSSF contributions | by the 9th day of each month | NSSF Act s20(1A); NSSF Year 4 notice |
| Pay SHIF deductions | by the 9th day of each month | SHI Regulations 2024 reg 17(1) |
| Pay AHL (employee and employer amounts) | not later than the 9th **working** day after the end of the month | AH Act s4(3); KRA PAYE page |

## Penalties and interest

- **PAYE not deducted or not accounted for:** a penalty of 25% of the tax involved or KShs 10 000, whichever is greater. The employer may instead be prosecuted under s109(1)(j) (ITA s37(2)). The employer may object within 30 days (s37(5A)).
- **Late or missing PAYE return:** 25% of the tax due or KShs 10 000, whichever is higher. The tax due is first reduced by amounts already paid (Tax Procedures Act ("TPA") s83(1)(a)).
- **Late payment of tax:** a 5% penalty (TPA s83A), plus interest of 1% a month or part of a month, simple, on the unpaid tax (TPA s38).
- **Deliberate understatement:** a 75% tax shortfall penalty. It rises by 10 points on a second offence and 25 points on a third, and falls by 10 points for a voluntary disclosure made before discovery or audit (TPA s84).
- **SHIF paid late:** a penalty of 2% of the amount due (SHI Act s27(6)).
- **AHL unpaid:** a penalty of 3% of the unpaid amount for each month or part of a month. It is recoverable as a civil debt (AH Act s7).
- **NSSF paid late:** penalties exist under the NSSF Act, but they were not read for this version.

## Cross-border points

- PAYE applies to emoluments paid to residents and non-residents alike (KRA PAYE page). A non-resident employee does not get the personal relief, which is granted to resident individuals (Third Schedule Head A; KRA PAYE page).
- An individual is resident if they have a permanent home in Kenya and were present during the year. Without a permanent home, they are resident if present for 183 days or more in the year, or for an average of more than 122 days a year across that year and the two before it (ITA s2 "resident").
- Non-Kenyans ordinarily resident in Kenya for more than 12 months are within SHIF (SHI Act s27(1)(b)).
- If the employer pays for a non-citizen's passages between Kenya and abroad, and the employee is in Kenya solely to serve that employer, those costs are not taxable to the employee (KRA PAYE page).

## Worked examples

### Example 1: employee earning KShs 100 000 a month

Wanjiru is a resident employee with a gross salary of KShs 100 000 a month in 2026. She has no other pension, insurance or medical fund contributions.

- **NSSF (employee):** Tier I 6% x 9 000 = 540. Tier II 6% x (100 000 - 9 000) = 5 460. Total 6 000. Her pay is below the 108 000 Upper Earnings Limit, so all of it above 9 000 counts.
- **SHIF:** 2.75% x 100 000 = 2 750.
- **AHL (employee):** 1.5% x 100 000 = 1 500.
- **Taxable pay:** 100 000 - 6 000 - 2 750 - 1 500 = 89 750.
- **Tax by band:**
  - 24 000 x 10% = 2 400.00
  - 8 333 x 25% = 2 083.25
  - (89 750 - 32 333) x 30% = 17 225.10
  - Total 21 708.35.
- **PAYE:** 21 708.35 less 2 400 personal relief = **19 308.35**.
- **Net pay:** 100 000 - 6 000 - 2 750 - 1 500 - 19 308.35 = **70 441.65**.
- **Employer's own cost on top of salary:** NSSF 6 000 + AHL 1 500 = 7 500. There is no employer SHIF.

```oa-check
name: Kenya monthly KShs 100 000, resident, 2026 (NSSF Year 4)
inputs:
  gross: 100000
  lel: 9000
  uel: 108000
steps:
  - nssf_tier1: min(gross, lel) * 0.06
  - nssf_tier2: max(0, min(gross, uel) - lel) * 0.06
  - nssf_employee: nssf_tier1 + nssf_tier2
  - shif: max(300, gross * 0.0275)
  - ahl_employee: gross * 0.015
  - taxable: gross - nssf_employee - shif - ahl_employee
  - band10: min(taxable, 24000) * 0.10
  - band25: max(0, min(taxable, 32333) - 24000) * 0.25
  - band30: max(0, min(taxable, 500000) - 32333) * 0.30
  - tax: band10 + band25 + band30
  - paye: max(0, tax - 2400)
  - net_pay: gross - nssf_employee - shif - ahl_employee - paye
  - employer_cost: nssf_employee + ahl_employee
expected:
  nssf_tier1: 540.00
  nssf_tier2: 5460.00
  nssf_employee: 6000.00
  shif: 2750.00
  ahl_employee: 1500.00
  taxable: 89750.00
  band10: 2400.00
  band25: 2083.25
  band30: 17225.10
  tax: 21708.35
  paye: 19308.35
  net_pay: 70441.65
  employer_cost: 7500.00
```

### Example 2: low earner, KShs 8 000 a month (SHIF minimum, relief wipes out PAYE)

Otieno earns KShs 8 000 a month, below the NSSF Lower Earnings Limit.

- **NSSF (employee):** 6% x 8 000 = 480, all Tier I. There is no Tier II because his pay is below 9 000.
- **SHIF:** 2.75% x 8 000 = 220. That is below the minimum, so he pays **300** (reg 17(2)).
- **AHL (employee):** 1.5% x 8 000 = 120.
- **Taxable pay:** 8 000 - 480 - 300 - 120 = 7 100.
- **PAYE:** tax 10% x 7 100 = 710. The personal relief of 2 400 is larger, so **PAYE is nil**. The unused relief is not paid out.
- **Net pay:** 8 000 - 480 - 300 - 120 = **7 100**.
- **Employer:** NSSF 480 + AHL 120 = 600.

```oa-check
name: Kenya monthly KShs 8 000, SHIF floor and nil PAYE (2026)
inputs:
  gross: 8000
  lel: 9000
  uel: 108000
steps:
  - nssf_tier1: min(gross, lel) * 0.06
  - nssf_tier2: max(0, min(gross, uel) - lel) * 0.06
  - nssf_employee: nssf_tier1 + nssf_tier2
  - shif_pct: gross * 0.0275
  - shif: max(300, shif_pct)
  - ahl_employee: gross * 0.015
  - taxable: gross - nssf_employee - shif - ahl_employee
  - tax: min(taxable, 24000) * 0.10
  - paye: max(0, tax - 2400)
  - net_pay: gross - nssf_employee - shif - ahl_employee - paye
  - employer_cost: nssf_employee + ahl_employee
expected:
  nssf_tier1: 480.00
  nssf_tier2: 0.00
  nssf_employee: 480.00
  shif_pct: 220.00
  shif: 300.00
  ahl_employee: 120.00
  taxable: 7100.00
  tax: 710.00
  paye: 0.00
  net_pay: 7100.00
  employer_cost: 600.00
```

## Ask the client first

1. Each employee's gross monthly pay, every cash allowance, and the value of each non-cash benefit (housing, car, meals, loans).
2. Whether each employee is resident. Only residents get the personal relief.
3. Contributions to registered pension or provident funds and to post-retirement medical funds, and life, health or education insurance premiums the employee pays.
4. Whether the employer has contracted out of NSSF Tier II into its own scheme.
5. Whether any employee or income is covered by an AHL exemption notice, and whether the employer is a public body.
6. Pay dates, and whether any month's PAYE, NSSF, SHIF or AHL was paid late.

## Sources

| Source | URL | Read on |
|---|---|---|
| Income Tax Act, Cap. 470, Kenya Law consolidated version of 1 July 2026 (s2 "resident", s15(2)(ac)–(ae), s22A, s37; Third Schedule Head A paras 1–2, Head B para 1) | https://new.kenyalaw.org/akn/ke/act/1973/16/eng@2026-07-01 | 2026-10-29 |
| KRA, Pay As You Earn (read for monthly bands, relief, benefits thresholds, allowable deductions, 9th-day deadline, AHL) | https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye | 2026-10-29 |
| National Social Security Fund Act 2013, Kenya Law version of 31 December 2022 (s2, s20, s21, Third Schedule) | https://new.kenyalaw.org/akn/ke/act/2013/45/eng@2022-12-31 | 2026-10-29 |
| NSSF, Notice to Employers: Year 4 (read for 2026) Contribution Rates (LEL 9 000, UEL 108 000, maxima, 9th-day remittance) | https://www.nssf.or.ke/notice-to-employers-year-4-2026-nssf-contribution-rates | 2026-10-29 |
| NSSF, Clarification on the Status of NSSF Contributions (read for Year 4 rates continue pending appeal issues) | https://www.nssf.or.ke/clarification-on-the-status-of-nssf-contributions | 2026-10-29 |
| KRA eCitizen, NSSF Calculator (read for February 2026 tiers; NSSF deducted before PAYE) | https://ecitizen.kra.go.ke/calculators/nssf-calculator | 2026-10-29 |
| Social Health Insurance Act 2023, Kenya Law version of 24 November 2023 (s27) | https://new.kenyalaw.org/akn/ke/act/2023/16/eng@2023-11-24 | 2026-10-29 |
| Social Health Insurance Regulations 2024 (read for LN 49 of 2024), Kenya Law version of 28 February 2025 (reg 17) | https://new.kenyalaw.org/akn/ke/act/ln/2024/49/eng@2025-02-28 | 2026-10-29 |
| Mweresa & 3 others v Social Health Authority, Petition E524 of 2024, [2025] KEHC 8365 (read for petition against the 2.75% rate struck out) | https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/8365/eng@2025-06-13 | 2026-10-29 |
| Affordable Housing Act 2024, Kenya Law version of 1 July 2026 (ss4–7) | https://new.kenyalaw.org/akn/ke/act/2024/2/eng@2026-07-01 | 2026-10-29 |
| Tax Procedures Act 2015, Kenya Law version of 1 September 2026 (ss38, 83, 83A, 84) | https://new.kenyalaw.org/akn/ke/act/2015/29/eng@2026-09-01 | 2026-10-29 |

Not yet confirmed:
- The PAYE rules made under ITA s130 that set the 9th-day remittance date. The date is taken from KRA's PAYE page.
- The NSSF Act's late-payment penalty provisions.
- Whether the employee's NSSF contribution counts toward the s22A KShs 360 000 cap. KRA's calculator treats it as pre-tax.
- The outcome of Petition E513 of 2024 and the pending civil appeal on the SHI Act and Regulations.
- The current NITA levy.
- How benefits such as housing, cars and low-interest loans are valued.
- How KRA rounds the monthly band of 8 333 against the annual 100 000.

## Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-11-02. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `ke-payroll-paye-nssf-shif-ahl` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/ke-payroll-paye-nssf-shif-ahl. If neither is available, confirm every figure against the official source pages cited above before relying on it.