PAYE, NSSF, SHIF, and Housing Levy: The Complete 2026 Guide for Kenyan Employers

Kenyan payroll in 2026 is not the same job it was two years ago. SHIF replaced NHIF in October 2024. The Housing Levy went live the same year. NSSF moved to a two-tier structure in February 2024, and the contribution limits jumped sharply again this February. If your payroll template still looks like a 2022 spreadsheet, you're cutting the wrong cheques right now.

This guide covers the four deductions every Kenyan employer has to get right: PAYE, NSSF, SHIF, and the Housing Levy. What the current rates are, who pays what, when it's due, and the specific places small businesses keep getting tripped up. For the full picture beyond payroll, see our Kenya HR guide.

The four deductions at a glance

Every employee on your payroll triggers four separate obligations each month. Different agencies, different forms, same deadline.

Deduction	Who pays	Remitted to	Due date
PAYE	Employee	Kenya Revenue Authority	9th of the following month
NSSF	Employee and employer	National Social Security Fund	9th of the following month
SHIF	Employee	Social Health Authority	9th of the following month
Housing Levy	Employee and employer	Kenya Revenue Authority	9th of the following month

PAYE

PAYE is personal income tax, deducted at source under the Income Tax Act. You register with KRA before your first payroll, compute the correct tax per employee each month, and remit to KRA by the 9th of the following month.

The bands haven't changed since the Finance Act 2023 rebuild. Here's what applies in 2026:

Monthly pay (KES)	Rate
First 24,000	10%
24,001 to 32,333	25%
32,334 to 500,000	30%
500,001 to 800,000	32.5%
Above 800,000	35%

Every employee gets a personal relief of KES 2,400 per month, which comes off the computed PAYE. Insurance relief and mortgage interest relief may also apply to specific people. A decent payroll calculator will handle all of this for you, including the interaction with NSSF, SHIF, and the Housing Levy in one pass.

One detail that trips up first-time employers: PAYE is computed on taxable income, not gross. Taxable income is gross salary minus NSSF, SHIF, and the Housing Levy. Get that order wrong and your PAYE figure comes out too high, which means you've over-deducted your staff and created a year-end reconciliation problem you didn't need.

NSSF

NSSF is Kenya's statutory retirement scheme. The two-tier structure under the NSSF Act 2013 started in February 2024, and the contribution limits rise each year. The Year 4 rates, effective February 2026, are:

• Tier 1: 6% of pensionable pay up to a lower earnings limit of KES 9,000
• Tier 2: 6% of pensionable pay between the lower earnings limit and an upper earnings limit of KES 108,000

Both the employee and the employer contribute 6%, so NSSF costs you 12% of pensionable pay combined, capped at the upper limit.

For someone earning KES 50,000 gross, NSSF works out to 6% of 50,000 = KES 3,000 from the employee, plus another KES 3,000 from the employer. Once pay crosses KES 108,000, NSSF caps at KES 6,480 each side, and further salary doesn't move the number.

The jump from 2025 to 2026 is the thing to watch. The upper earnings limit went from KES 72,000 to KES 108,000. The maximum total contribution per employee per month went from KES 8,640 to KES 12,960. If your January 2026 payroll ran on the old limits, that was fine for January. But your February run and everything after needs to switch over. It's the kind of detail where a single missed update cascades into twelve months of under-contributions.

SHIF

SHIF replaced NHIF in October 2024. It funds the Social Health Authority, which runs Kenya's universal health coverage programme.

The rate is 2.75% of gross salary. Employee only, no employer match. Minimum KES 300 per month, and no upper cap on contributions.

For a Mombasa hotel manager on KES 80,000 gross, SHIF works out to 2.75% of 80,000 = KES 2,200 per month. A cleaner on KES 10,000 would calculate to KES 275, but the floor kicks in and they pay KES 300 instead.

The switch from NHIF caught a lot of employers sideways. NHIF ran on flat bands, so a KES 100,000 earner and a KES 400,000 earner both paid KES 1,700. SHIF scales linearly. The KES 100,000 earner now pays KES 2,750, the KES 400,000 earner pays KES 11,000. Top earners felt the increase immediately, and it's the single most common complaint new SHIF-era employees raise with HR.

Your job as an employer: register the company with the Social Health Authority, deduct SHIF from gross pay each month, and remit by the 9th. Worth checking that your staff are actually showing up under SHIF in the SHA portal. A surprising number of people are still sitting in dormant NHIF records more than a year after the switch.

Housing Levy

The Housing Levy came in under the Affordable Housing Act 2024, effective March 2024. It funds the government's affordable housing programme.

• Employee: 1.5% of gross
• Employer: 1.5% of gross
• Remitted to: Kenya Revenue Authority, by the 9th

For the Mombasa hotel manager on KES 80,000, that's KES 1,200 off their pay and another KES 1,200 out of your budget. On a 25-person team averaging KES 50,000, the employer's Housing Levy bill alone runs to KES 18,750 a month.

This is budget money. It's not coming out of your staff's pay. If you haven't built it into your cost-of-employment model yet, your true monthly cost per person is higher than you think.

Full example: a 25-person Nairobi restaurant

Westlands restaurant, 25 employees on the books, everyone averaging KES 50,000 gross. For one employee in one month, the breakdown is:

Item	Employee deduction	Employer cost
PAYE	KES 5,846	0
NSSF (6% of gross)	KES 3,000	KES 3,000
SHIF (2.75% of gross)	KES 1,375	0
Housing Levy (1.5% each)	KES 750	KES 750
Totals	KES 10,971	KES 3,750

The employee takes home KES 39,029. Your total cost for that one employee is KES 53,750 (gross of 50,000 plus KES 3,750 in employer contributions). Across the full team of 25, that works out to KES 1,343,750 a month in pure statutory cost, before a shilling of benefits, training, or overtime.

The gap between gross salary and the true cost of employment is the biggest blind spot for first-time Kenyan employers. Budget from the true-cost figure, not the gross figure.

Where employers keep going wrong

The same handful of mistakes shows up in almost every payroll audit:

• Still deducting NHIF instead of SHIF, more than a year after the switch
• Using the old flat KES 200 NSSF figure instead of the two-tier structure
• Missing the February 2026 NSSF limit update and running payroll at the 2025 numbers
• Forgetting the Housing Levy entirely
• Calculating PAYE on gross instead of taxable income
• Missing the 9th-of-the-month deadline and watching penalties accumulate
• Not registering new hires with NSSF and SHA before their first payroll run

Any one of these triggers penalties. Late Housing Levy alone carries a 3% monthly penalty on the unpaid balance, and KRA, NSSF, and SHA all have their own late-payment schedules. The cost of being a few weeks late quickly outstrips whatever cashflow benefit you thought you were getting from the delay.

The short version

• Four deductions, four separate filings, all due by the 9th of the following month
• SHIF (2.75% of gross, employee only) replaced NHIF in October 2024
• NSSF Year 4 limits from February 2026: lower 9,000, upper 108,000, 6% each side, capped at KES 6,480 per party per month
• Housing Levy (1.5% employee plus 1.5% employer) has been mandatory since March 2024
• PAYE is computed on taxable income, after NSSF, SHIF, and Housing Levy come off gross
• Your true cost per employee is several percentage points higher than their gross salary
• The Employment Act 2007 sits on top of all this, covering contracts, leave, and termination

Getting these four right is the foundation of legal Kenyan payroll. If your templates have drifted, it's worth an afternoon now to pull them current, rather than letting an expensive mess accumulate through the year.