Kenya Employer Payroll Compliance 2026
For HR managers, SME owners and finance teams. Everything you need on PAYE, NSSF, SHIF and Housing Levy obligations, the true cost of hiring, and the 2026 changes that affect your payroll.
The True Cost of Hiring — Beyond Gross Salary
When you agree to pay someone KES 100,000 gross, you are actually committing to more. Here is what each hire actually costs:
| Gross Salary | +Employer NSSF | +Employer Housing | Total Cost | Overhead % |
|---|---|---|---|---|
| Ksh 50,000 | Ksh 3,000 | Ksh 750 | Ksh 53,750 | +7.5% |
| Ksh 100,000 | Ksh 6,000 | Ksh 1,500 | Ksh 107,500 | +7.5% |
| Ksh 150,000 | Ksh 6,480 | Ksh 2,250 | Ksh 158,730 | +5.8% |
| Ksh 250,000 | Ksh 6,480 | Ksh 3,750 | Ksh 260,230 | +4.1% |
Every Kenyan employer pays approximately 9.5–10.5% above gross salary in mandatory employer contributions. Budget for this in your headcount planning.
Monthly Payroll Obligations
File and Pay PAYE (P10 Return)
Monthly PAYE return (P10) filed via iTax showing each employee's gross pay, PAYE deducted, and cumulative year-to-date figures. Payment via KRA paybill or bank transfer.
Remit SHIF Contributions
Social Health Insurance Fund: 2.75% of each employee's gross salary (minimum KES 300), deducted from the employee. There is no employer SHIF match. Remit via the SHA portal or KRA payroll integration.
Remit Housing Levy
Affordable Housing Levy: 1.5% employee + 1.5% employer of gross salary for every employee. Remitted via KRA iTax alongside PAYE.
Remit NSSF Contributions
Employee NSSF (6% of pensionable pay, max KES 108,000 from Feb 2026, so up to KES 6,480) plus a matching employer contribution. File via the NSSF employer portal or M-Pesa Paybill 333300.
Annual Obligations
Issue P9 certificates to all employees
File NSSF annual return
File employer annual IT2C return via iTax
E-TIMS receipts for all business expenses
PAYE annual reconciliation — resolve discrepancies before year-end
New Employee Payroll Checklist
5 Most Expensive Payroll Mistakes in Kenya
❌ Not applying reliefs employees have submitted
Consequence: Employee overpays PAYE — files for a refund at year-end. You may face employee complaints and audit queries.
Fix: Set up a document collection process. Collect mortgage statements, pension certificates, and insurance policies at hire and at the start of each year.
❌ Late P10 filing even when PAYE is zero
Consequence: KES 20,000 penalty per late return, even if you owe no tax. The return itself is mandatory regardless of tax position.
Fix: File P10 by the 9th every month without exception. Set an automated reminder. Use payroll software that auto-generates the P10.
❌ Treating SHIF as an employer cost
Consequence: SHIF is employee-only at 2.75% of gross. Budgeting a matching employer SHIF contribution overstates your true cost of hiring.
Fix: Only NSSF (6%) and the Housing Levy (1.5%) are matched by the employer. Deduct SHIF from the employee and remit it, but do not add an employer share.
❌ Not collecting E-TIMS receipts for expense claims
Consequence: Employee expense reimbursements without E-TIMS receipts may not be tax-deductible for the business from 2026, increasing your corporate tax burden.
Fix: Update your expense policy: all claims above KES 1,000 require an E-TIMS receipt. Educate employees on requesting E-TIMS invoices from suppliers.
❌ NSSF contribution calculation error at upper limit
Consequence: Calculating NSSF on the full salary above the KES 108,000 pensionable pay ceiling results in over-deduction from employee and employer.
Fix: Cap the NSSF calculation at KES 108,000 pensionable pay (max employee KES 6,480 from Feb 2026). Verify your payroll software applies the ceiling correctly.
Legal Payslip Requirements
The Employment Act requires employers to provide a written payslip with each salary payment. A compliant payslip must include:
P9 Form Generator
Create P9 certificates instantly
Filing Deadlines
All monthly and annual dates
SHIF & NSSF 2026
Complete rate change breakdown