PAYE, NSSF & Housing Levy: The 2025/2026 Guide to Payroll Statutory Deductions in Kenya

Payroll Statutory Deductions Kenya

Managing payroll in Kenya is more complex than ever, especially with the 2025/2026 statutory requirements for PAYE, NSSF, and the Housing Levy. Businesses must remain compliant with KRA and other regulatory bodies to avoid penalties, interest, and potential audits. This comprehensive guide explains all payroll statutory deductions, calculation methods, filing obligations, and best practices for seamless tax compliance Kenya.

At Adamjee Auditors, we provide businesses across Nairobi, Mombasa, Kisumu, Nakuru, and beyond with professional payroll services, bookkeeping, audit and assurance, and CFO advisory services to ensure full compliance with Kenya’s payroll laws.

Understanding Payroll Statutory Deductions in Kenya

Payroll statutory deductions are amounts legally required to be withheld from employees’ salaries and remitted to relevant authorities. The key deductions in Kenya include:

PAYE (Pay As You Earn) – Income tax collected by employers from employee salaries and remitted to KRA via the iTax system.
NSSF (National Social Security Fund) – Social security contributions to provide retirement benefits.
Housing Levy / NHIF (National Hospital Insurance Fund) – Health insurance and housing deductions required under Kenyan law.

Failure to comply can lead to fines, interest, audits, and reputational risk. Staying up-to-date with changes in rates and thresholds is essential.

Learn more about our Tax Compliance Kenya services.

Step 1: PAYE – Understanding the 2025/2026 Rates & Thresholds

PAYE is the largest component of payroll deductions. In 2025/2026, the KRA maintains progressive tax bands:

Taxable Monthly Income (KES)	Rate (%)
0 – 24,000	10
24,001 – 32,333	25
32,334 and above	30

Key Considerations for Employers:

Use the KRA iTax portal for PAYE computation.
Apply allowable deductions (e.g., personal relief, insurance relief).
Remit PAYE by the 9th of the following month to avoid penalties.

Adamjee Payroll Services Kenya ensures accurate PAYE calculation, filing, and compliance reporting.

Step 2: NSSF Contributions

The National Social Security Fund (NSSF) provides retirement benefits to employees.

2025/2026 NSSF Contributions (Kenya):

Employee: KES 200 per month
Employer: KES 200 per month
Contributions are remitted through the NSSF i-portal system.

Employers must maintain accurate records to avoid audits. Non-compliance may lead to fines and interest accumulation.

Learn more about Adamjee Audit & Assurance.

Step 3: Housing Levy / NHIF Contributions

The Housing Levy is sometimes combined with NHIF health deductions, depending on the organization’s payroll policies.

2025/2026 NHIF Rates (example):

Gross Monthly Salary (KES)	NHIF Deduction (KES)
0 – 5,999	150
6,000 – 7,999	300
8,000 – 11,999	400
12,000 – 14,999	500
15,000 – 19,999	600
20,000 – 24,999	750
25,000 – 29,999	850
30,000 – 34,999	900
35,000 – 39,999	950
40,000 – 44,999	1,000
45,000 – 49,999	1,100
50,000 – 59,999	1,200
60,000 – 69,999	1,300
70,000 – 79,999	1,400
80,000 – 89,999	1,500
90,000 – 99,999	1,600
100,000 and above	1,700

Employers must remit NHIF by the 9th of each month via online banking or NHIF portal.

Adamjee Auditors Bookkeeping Services ensures payroll deductions are properly reflected in financial records.

Step 4: How to Calculate Payroll Deductions Accurately

To calculate statutory deductions:

Determine gross salary
Compute PAYE using the progressive bands
Deduct NSSF contributions
Deduct NHIF/Housing Levy based on gross salary
Apply any allowable reliefs (personal, insurance, mortgage interest)

Employers should document every calculation to remain audit-ready and compliant with KRA.

Use our PAYE Calculator for automated computations.

Step 5: Filing and Remittance Requirements

Monthly Obligations:

PAYE: Remit via iTax by the 9th of the following month
NSSF: Remit via NSSF portal by 9th
NHIF/Housing Levy: Remit by 9th

Annual Obligations:

Submit PAYE annual returns by June 30 for the preceding year
Maintain payroll registers for 5 years for audit purposes

Adamjee Tax Compliance Kenya ensures businesses meet both monthly and annual statutory deadlines.

Step 6: Common Payroll Compliance Mistakes

Businesses often make mistakes that trigger KRA audits:

Incorrect PAYE band application
Failure to remit NSSF or NHIF timely
Improper documentation of reliefs and allowances
Omitting casual or contract staff from payroll
Using outdated statutory rates

Avoiding these errors ensures smoother compliance and reduces audit risk.

Step 7: Leveraging Technology for Payroll Management

Modern payroll software ensures accuracy and audit readiness:

Automates PAYE, NSSF, and NHIF calculations
Generates monthly and annual reports
Maintains employee records and payslips
Reduces human error and manual filing

Adamjee Payroll Services integrates payroll automation with compliance, reducing administrative burden for finance teams.

Payroll Compliance Checklist for 2025/2026

Task	Frequency	Responsible	Notes
Calculate PAYE	Monthly	Accountant	Apply correct rates & reliefs
Deduct NSSF	Monthly	Payroll Officer	Verify employee and employer contributions
Deduct NHIF / Housing Levy	Monthly	Payroll Officer	Ensure correct salary band
Remit deductions	Monthly	Finance Manager	iTax & NHIF portals
File annual PAYE returns	Annually	CFO	By June 30
Maintain payroll records	Ongoing	HR / Finance	Keep for 5 years

Frequently Asked Questions

What is the Housing Levy in Kenya?
A statutory deduction, often merged with NHIF, to fund housing schemes and employee benefits.

How is PAYE calculated in Kenya?
Using progressive tax bands, applying reliefs and allowances.

What are the penalties for non-compliance?
Late remittances incur interest and fines; persistent defaults can trigger KRA audits.

Do all employees contribute to NSSF?
Yes, all employees under statutory thresholds contribute, including casual workers in some cases.

Can Adamjee Auditors handle payroll for my company?
Yes, we offer full payroll management and compliance services.

Partner With Kenya’s Trusted Payroll and Tax Advisors

Managing payroll deductions accurately is critical for tax compliance Kenya and overall business health. Adamjee Auditors provides expert guidance in PAYE, NSSF, Housing Levy, payroll automation, bookkeeping, and CFO advisory services.

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