NSSF, SHIF and Housing Levy: Kenya's Payroll Deductions Explained
Kenya's statutory payroll stack — NSSF Year 4 tiers, SHIF at 2.75%, the 1.5% housing levy and PAYE — explained and walked through one payslip to net pay
Kenya's NSSF rates in 2026 come from the Year 4 schedule under the NSSF Act, in force since February 2026: the employee contributes 6% of pensionable pay and the employer matches it with another 6%. The pay that 6% applies to is split into two slices — Tier I covers the first KSh 9,000 (the lower earnings limit) and Tier II covers everything above that, up to the upper earnings limit of KSh 108,000. Pay beyond KSh 108,000 attracts no further mandatory contribution, which caps the employee deduction at KSh 6,480 a month: 9,000 × 6% = KSh 540 from Tier I, plus (108,000 − 9,000) = 99,000 × 6% = KSh 5,940 from Tier II. With the employer's matching share, the maximum combined remittance is KSh 12,960. One date matters when checking payslips: the Year 3 rates ended on 31 January 2026, so a January 2026 payslip and a February 2026 payslip are computed on different schedules.
NSSF never appears alone, though. A 2026 Kenyan payslip carries a block of four statutory deductions — NSSF, SHIF at 2.75% of gross, the Affordable Housing Levy at 1.5% of gross, and PAYE on whatever the law leaves taxable. Each has a different base, a different ceiling (or none), and a different statute behind it, and the order they are applied in changes the PAYE bill. The rest of this guide takes a single gross salary of KSh 150,000 and runs it through all four exactly as a payroll system does, so you can see how KSh 150,000 becomes KSh 103,618.15 in the bank.
Same salary, four rulebooks
| Deduction | Employee pays | Employer adds | Charged on | Ceiling |
|---|---|---|---|---|
| NSSF (Year 4) | 6% | 6% match | Pensionable pay in two tiers | KSh 6,480 employee max |
| SHIF | 2.75% | — | Gross monthly salary | None — floor of KSh 300 |
| Housing levy | 1.5% | 1.5% match | Gross monthly salary | None |
| PAYE | 10%–35% bands | — | Gross minus the three above | None |
The bases differ more than the rates do. NSSF uses pensionable pay carved into tiers and capped; SHIF and the housing levy use uncapped gross; PAYE uses gross minus the other three. Get one base wrong and every figure downstream moves with it. The statutes: the NSSF Act, 2013 (with the Year 4 notice to employers), the Social Health Insurance Act, 2023, the Affordable Housing Act, 2024, and the Income Tax Act bands set by the Finance Act 2023.
NSSF is a tier split, not a flat cut
The most common NSSF mistake is multiplying gross pay by 6% and stopping. The schedule doesn't work that way. Take pensionable pay of KSh 50,000: Tier I takes the first 9,000 × 6% = KSh 540, Tier II takes the remaining (50,000 − 9,000) = 41,000 × 6% = KSh 2,460, and the deduction is KSh 3,000. Someone on KSh 150,000 pays no more than someone on KSh 108,000, because the base is capped before the rate is applied — both hit the KSh 6,480 maximum. At the other end, a worker earning below the lower limit contributes on actual pay only: KSh 6,000 of pensionable pay gives 6,000 × 6% = KSh 360, all of it Tier I.
Two operational details worth knowing. Employers must remit by the 9th day of the following month, and Tier II can lawfully be routed to an approved contracted-out pension scheme instead of NSSF — that changes where the money goes, not how much is computed. The NSSF contribution calculator shows the tier split explicitly and carries both the Year 3 and Year 4 schedules, which is exactly what you need when reconciling a payslip from either side of the February 2026 boundary.
SHIF traded a ceiling for a percentage
SHIF — the Social Health Insurance Fund — replaced NHIF on 1 October 2024 under the Social Health Insurance Act, 2023, and the structural change matters more than the name. NHIF was a graduated table that topped out at KSh 1,700 a month regardless of income. SHIF is a flat 2.75% of gross salary with no upper limit and a floor of KSh 300 a month. On KSh 100,000 gross that is 100,000 × 2.75% = KSh 2,750; on KSh 300,000 it is 300,000 × 2.75% = KSh 8,250 — nearly five times what the old NHIF ceiling allowed. The floor only binds at very low pay: KSh 10,000 gross gives 10,000 × 2.75% = KSh 275, so the minimum KSh 300 applies instead.
The housing levy is 1.5%, not 3%
The Affordable Housing Levy confuses people because two equal numbers sit side by side. The employee is deducted 1.5% of gross monthly salary, and the employer contributes a matching 1.5% on top — but only the employee share ever leaves your pay. On a KSh 160,000 gross salary, that is 160,000 × 1.5% = KSh 2,400 deducted from the employee and KSh 2,400 added by the employer, for a total monthly remittance of KSh 4,800 to KRA. Reading that as a 3% payslip deduction doubles the perceived cost of the levy, and it is the single most frequent misreading of the statute.
The legal history explains why older articles contradict current payslips: the levy introduced by the Finance Act 2023 was declared unconstitutional by the High Court in November 2023, and Parliament replaced it with the standalone Affordable Housing Act, 2024, effective 19 March 2024 — the version in force today. KRA collects, remittance is due by the ninth working day after the end of the month, and unpaid amounts attract a penalty of 3% of the unpaid funds for every month outstanding. The Kenya housing levy calculator keeps the employee and employer sides separate and models that penalty, which makes it useful for employer cash-flow planning as well as payslip checks.
Order of operations: why PAYE comes last
The employee's NSSF, SHIF and housing levy amounts are all allowable deductions against taxable income — SHIF and the housing levy joined the list in December 2024 under the Tax Laws (Amendment) Act, 2024. PAYE is therefore charged not on gross pay but on what remains after the other three are removed:
Net pay = Gross − NSSF − SHIF − housing levy − PAYE, where PAYE is computed on (Gross − NSSF − SHIF − housing levy) through the marginal bands, then reduced by KSh 2,400 personal relief.
The bands, set by the Finance Act 2023:
| Monthly taxable pay | Rate |
|---|---|
| First KSh 24,000 | 10% |
| KSh 24,001 – 32,333 | 25% |
| KSh 32,334 – 500,000 | 30% |
| KSh 500,001 – 800,000 | 32.5% |
| Above KSh 800,000 | 35% |
Personal relief applies against the tax, not the income — so anyone whose computed PAYE is KSh 2,400 or less pays nothing at all.
KSh 150,000, gross to bank
Here is the full stack in payroll order, every step shown:
- NSSF Tier I: 9,000 × 6% = KSh 540
- NSSF Tier II: pay is capped at 108,000, so (108,000 − 9,000) = 99,000 × 6% = KSh 5,940 — NSSF total KSh 6,480
- SHIF: 150,000 × 2.75% = KSh 4,125
- Housing levy: 150,000 × 1.5% = KSh 2,250
- Taxable pay: 150,000 − 6,480 − 4,125 − 2,250 = KSh 137,145
- PAYE: first band 24,000 × 10% = 2,400; second band (32,333 − 24,000) = 8,333 × 25% = 2,083.25; third band (137,145 − 32,333) = 104,812 × 30% = 31,443.60. Total before relief: 2,400 + 2,083.25 + 31,443.60 = 35,926.85; less 2,400 relief = KSh 33,526.85
- Net pay: 150,000 − 6,480 − 4,125 − 2,250 − 33,526.85 = KSh 103,618.15
The whole statutory wedge is 6,480 + 4,125 + 2,250 + 33,526.85 = KSh 46,381.85, or 46,381.85 ÷ 150,000 = 30.92% of gross. The KRA PAYE calculator executes this exact sequence from a single input, which is faster than hand arithmetic when you are comparing job offers or stress-testing a raise.
Five ways payslips go wrong
- Employer shares deducted from the employee. The NSSF match and the housing levy match are employer costs. If your payslip shows both sides of either coming out of your pay, that is an error, not a rate change.
- PAYE charged on gross. At KSh 150,000 the three pre-tax deductions total 6,480 + 4,125 + 2,250 = KSh 12,855, all of which would otherwise fall in the 30% band — so taxing gross instead of taxable pay overstates PAYE by 12,855 × 30% = KSh 3,856.50 every month.
- The wrong NSSF schedule for the month. Year 3 ran until 31 January 2026; Year 4 applies from February 2026. Back-pay corrections must use the schedule of the pay month, not today's.
- The levy read as 3%. The employee housing levy deduction is 1.5% of gross; the other 1.5% never touches your pay.
- SHIF below the floor. At low gross pay, the KSh 300 minimum overrides the percentage — a payroll system computing 2.75% blindly will underdeduct.
Every rate in this post traces to a primary instrument — the Year 4 NSSF notice, the Social Health Insurance Act, the Affordable Housing Act, the Finance Act 2023 bands — and each of those can change by gazette notice rather than by calendar year, which is why the three calculators above store their schedule values as data with the source labelled. The rest of the Kenya payroll collection on Quanta is built to the same rule: no constant without a named instrument behind it. A payslip that still refuses to reconcile after the five checks above usually hides something structural — a schedule-boundary month, a contracted-out Tier II scheme, a mid-month start — and arithmetic alone will not settle it. Send us the numbers and we will work out which rulebook your payroll actually ran.