Employer Tax Contributions

Tax Type	Rate	Base
PAYE (Pay As You Earn)	Progressive: 10% to 35%	Employee's taxable income
NSSF (National Social Security Fund)	6% (matched by employer)	Tier I: up to KES 8,000 monthly earnings; Tier II: KES 8,001 to KES 72,000 monthly earnings
SHIF (Social Health Insurance Fund)	2.75%	Employee's gross salary (minimum KES 300, no cap)
Housing Levy	1.5% (matched by employer)	Employee's gross monthly salary

Filing & Compliance

• Monthly Deadline: PAYE, NSSF, SHIF, and Housing Levy deductions must be remitted by the 9th day of the following month.
• Filing: Employers are required to file PAYE returns through the iTax system. Housing Levy is declared under sheet "M" of the PAYE return.
• Penalties: Late filing of PAYE attracts a penalty of the higher of 25% of the tax due or KES 10,000. Late payment incurs a 5% penalty plus 1% interest per month.

In Kenya, employers are legally obligated to deduct various taxes and contributions from employee salaries, impacting net pay. These deductions fund government services and social welfare programs.

PAYE (Pay As You Earn)

PAYE is the system for deducting income tax directly from employee salaries. The tax rate is progressive, meaning higher earners pay a larger percentage.

• Tax Bands and Rates (Monthly):
  • KES 0 – 24,000: 10%
  • KES 24,001 – 32,333: 25%
  • KES 32,334 – 499,000: 30%
  • KES 500,001 – 799,000: 32.5%
  • Above KES 800,000: 35%
• Personal Relief: KES 2,400 per month. This amount is deducted from the calculated tax, reducing the overall tax burden.

NSSF (National Social Security Fund)

NSSF contributions are mandatory for both employees and employers. These contributions provide a safety net for retirement and other contingencies.

• Contribution Rate: 6% of gross salary for both employee and employer (total 12%).
• Minimum Contribution: KES 480 per month, split equally between employee and employer.
• Maximum Contribution: KES 4,320 per month, (split equally), applying to salaries up to KES 72,000.

NHIF (National Hospital Insurance Fund) \ SHIF (Social Health Insurance Fund)

NHIF has been replaced by SHIF. SHIF contributions provide access to healthcare services.

• Contribution Rate: 2.75% of gross salary.

Affordable Housing Levy (AHL)

The AHL contributes to the government's affordable housing initiatives.

• Contribution Rate: 1.5% of gross salary for both employee and employer (total 3%).

Pension Contributions

Employees can contribute to registered pension schemes and receive tax benefits.

• Deductibility: Contributions are deductible from taxable income.
• Maximum Deductible Amount: KES 30,000 per month or KES 360,000 annually.

Mortgage Interest Deduction

Employees can deduct interest paid on mortgages for residential properties.

• Maximum Deductible Amount: KES 25,000 per month or KES 300,000 annually.

Other Deductions

Other allowable deductions include:

• Post-retirement medical fund contributions (up to KES 15,000 per month).

Deadlines and Procedures

• PAYE, NSSF, and AHL: Employers must remit these deductions by the 9th day of the following month. Late payment penalties apply.
• Filing: Employers must file PAYE returns using the iTax system. Specific formats and procedures are outlined by the Kenya Revenue Authority (KRA).

Note: This information is current as of February 5, 2025, and may be subject to change due to legal or regulatory updates. It's recommended to consult with a tax professional for personalized advice.