Statutory Deductions in Kenya 2026: What Your Payslip Actually Pays, from Gross to Net

In brief

• Four statutory deductions now stand between a Kenyan employee’s gross pay and the money that reaches their account: PAYE, NSSF, SHIF and the affordable housing levy. From February 2026 the NSSF ceiling rose for the fourth year running, and the arithmetic on most payslips changed again.
• The order of computation matters as much as the rates. NSSF, SHIF and the housing levy all come off before PAYE is calculated, which softens their true cost, and a payslip that taxes first and deducts after is simply wrong.
• An employee earning KES 100,000 gross takes home about KES 70,442, while costing the employer about KES 107,550. Both figures are worked in full below, because the gap between them is where most payroll disputes begin.

Every month, millions of Kenyan payslips perform the same four subtractions, and remarkably few of the people on either side of them could say precisely what each one is, where it goes, or why the net figure is what it is. The answers are not trivia. An employer who gets the computation wrong under-remits to one statutory body or another and inherits the penalties that follow, while an employee who cannot read their own payslip cannot tell whether they are being paid lawfully at all. This guide works through the 2026 position deduction by deduction, then from gross to net in two worked examples, and ends with the points that matter when an employment contract is being negotiated or a dispute is brewing.

The four deductions, one by one

PAYE

Pay As You Earn is income tax collected at source, and it is computed on taxable pay in graduated bands. The first KES 24,000 of monthly taxable pay is taxed at ten percent, the next slice up to KES 32,333 at twenty-five percent, the band up to KES 500,000 at thirty percent, the band up to KES 800,000 at thirty-two and a half percent, and anything above that at thirty-five percent. Every employee then receives a personal relief of KES 2,400 a month, subtracted from the tax itself rather than from income, and the tax can never fall below zero. The critical phrase in all of this is taxable pay, which is not the same thing as gross pay, for reasons the next section explains.

NSSF, now in its fourth phase

The National Social Security Fund contribution is the one that has been moving. The NSSF Act of 2013 built a phased escalation into its schedule, and February 2026 brought Phase 4. The lower earnings limit now stands at KES 9,000 and the upper earnings limit at KES 108,000, being three times national average earnings. The employee contributes six percent of pensionable pay up to that ceiling and the employer matches it shilling for shilling, so the maximum monthly deduction from the employee is KES 6,480, with the same again from the employer. An employee earning below the ceiling simply contributes six percent of actual pay. For anyone who last looked at NSSF when it was a flat two hundred shillings, the current figures deserve a moment’s attention, because a KES 6,480 deduction on a senior payslip is no longer a rounding error, and the matching employer contribution has quietly become a material employment cost.

SHIF

The Social Health Insurance Fund replaced the NHIF and abandoned its banded tables for a single rate. The deduction is two and three quarters percent of gross monthly pay, with a floor of KES 300 and, importantly, no ceiling. On a KES 100,000 salary that is KES 2,750; on a KES 500,000 salary it is KES 13,750. Because the rate is flat and uncapped, SHIF is the deduction whose weight grows fastest as pay rises, and it is the one senior employees most often query when they compare payslips across the two regimes.

The affordable housing levy

The levy under the Affordable Housing Act, 2024 takes one and a half percent of gross monthly salary from the employee and an equal one and a half percent from the employer. It applies across the board, it is collected through payroll, and it is remitted to the Kenya Revenue Authority. Whatever one’s view of the policy, the legal position is settled and the employer’s duty to deduct and remit is not optional.

The order of computation, which most payslips get right and some do not

Here is the piece of the puzzle that changes the arithmetic. NSSF, SHIF and the housing levy are all allowable deductions in computing taxable pay. The lawful sequence is therefore to start with gross pay, subtract the three social contributions, and only then apply the PAYE bands to what remains, before finally subtracting personal relief from the resulting tax. The effect is that each of the three contributions enjoys relief at the employee’s marginal tax rate, so a KES 6,000 NSSF deduction truly costs an employee in the thirty percent band about KES 4,200. A payroll that computes PAYE on gross and then stacks the contributions afterwards overstates the tax, understates the net, and hands the employee a claim. When a payslip looks wrong, this ordering is the first thing I check.

From gross to net, worked in full

Two salaries, one at KES 50,000 and one at KES 100,000, worked through the 2026 rates.

Monthly figures in KES	Gross 50,000	Gross 100,000
NSSF (6%, capped at 6,480)	3,000	6,000
SHIF (2.75% of gross)	1,375	2,750
Affordable Housing Levy (1.5%)	750	1,500
Taxable pay after the three deductions	44,875	89,750
PAYE after personal relief of 2,400	5,846	19,308
Net pay to the employee	39,029	70,442
Employer’s additional cost (NSSF match, levy match, NITA)	3,800	7,550
True monthly cost of the employee	53,800	107,550

A few things in the table reward attention. The KES 100,000 employee’s deductions total just under thirty percent of gross, of which PAYE is roughly two thirds, so the social contributions, much complained of, are the smaller part of the story. The employer’s side adds the NSSF match, the levy match and the NITA training levy of KES 50, which means the true cost of a KES 100,000 employee is KES 107,550 before any benefits, insurance or bonus. And the employee’s net of KES 70,442 is the figure that matters in every conversation about affordability, borrowing and attachment of salary, because the courts and the lenders look at net, not gross.

The employer’s obligations, briefly but seriously

Each of the four deductions must be remitted to its collector, PAYE and the housing levy to the Kenya Revenue Authority, NSSF to the Fund and SHIF to the Social Health Authority, by the ninth of the month following payroll. Each statute carries its own penalties and interest for late remittance, and they compound quickly. Two further points are less widely understood. First, deducting from the employee and failing to remit is not a cash-flow strategy, it is a statutory offence under each regime, and it exposes the officers who permitted it personally, not only the company. Second, the Employment Act requires an itemised pay statement, so an employee is entitled to see each deduction named and quantified, and an employer who pays round net figures without a payslip is in breach even if every shilling was remitted. Employers running payroll through third-party providers remain responsible for both.

What this means when you draft, negotiate or dispute

Almost every payroll dispute I see traces back to a contract that promised the wrong number. An employment contract should state gross pay, because gross is the figure the statutes act upon, and the rates change under the parties’ feet. A contract that promises net pay of a fixed amount makes the employer the insurer of every future rate increase, an obligation few intend to take on, and one that has become expensive four Februaries in a row as the NSSF phases have landed. For employers hiring now, the practical sequence is to budget at cost to company, offer in gross, and let the payslip do the explaining. For employees comparing offers, the only honest comparison is net to net under the current rates, and the table above is how to run it. The wider hiring context, including what it costs to bring in foreign staff, is covered in our work permits guide, and where deductions have gone wrong and the relationship has soured, the remedies sit with our employment and labour practice.

What happens next

The NSSF schedule has one phase left. February 2027 is expected to lift the earnings limits again and complete the escalation the 2013 Act set in motion, at which point the upper limit will be anchored to four times national average earnings and the era of annual payslip surprises should end. Budget-season proposals to adjust PAYE bands or reliefs surface every year and mostly sink; if the Finance Act, 2027 moves any of the figures in this guide, I will update it and the update will be dated. The figures above state the position as at 9 October 2026.

Frequently asked questions

How much is deducted from a KES 100,000 salary in Kenya in 2026?

About KES 29,558 in total: NSSF of 6,000, SHIF of 2,750, housing levy of 1,500 and PAYE of about 19,308 after personal relief, leaving net pay of roughly KES 70,442.

Are NSSF, SHIF and the housing levy deducted before or after tax?

Before. All three are allowable deductions in computing taxable pay, so PAYE is charged on what remains after them. A payslip that computes tax on gross first is wrong and overstates the tax.

What is the maximum NSSF deduction in 2026?

KES 6,480 per month from the employee, matched by the employer, reached at the upper earnings limit of KES 108,000 under Phase 4, which took effect in February 2026.

My employer deducts but has not remitted. What can I do?

The deduction belongs to the statutory body from the moment it is made, and failing to remit is an offence under each regime. Check your status on the NSSF and SHA portals, raise it in writing with the employer first, and take advice early, because the remittance records also matter to your pension, your cover and any later claim.

Do the deductions apply to bonuses and allowances?

PAYE applies to the whole of cash employment income, including bonuses and allowances. SHIF and the housing levy are charged on gross monthly pay, and NSSF on pensionable earnings up to the ceiling. The safe assumption is that a shilling paid through payroll is a shilling the deductions see.

Peter Maina is a Partner of Peter Maina & Company Advocates. This article states the law as at 9 October 2026. It is general information, not legal advice. For advice on payroll compliance, employment contracts or a deductions dispute, reach out on e-mail peter@pmlaw.co.ke or WhatsApp +254 714 644 080.