What PAYE is and who pays it in Kenya
PAYE (Pay As You Earn) is the income tax KRA collects from employees through their employer. The employer calculates the tax on each salary, deducts it before paying the employee, and remits it to KRA by the 9th of the following month. The employee never files it separately; it is taken at source. Every employer with staff on a payroll must operate PAYE, regardless of business size, once an employee earns above the tax-free threshold.
PAYE is progressive. Your income is split into bands, and each band is taxed at its own rate, so a higher salary does not push your whole income into a higher rate, only the portion that falls in that band. After the gross tax is computed, KRA gives every resident employee a personal relief of KES 2,400 per month (KES 28,800 a year), which is subtracted from the tax due. The result is your PAYE.
PAYE is only one of the deductions on a Kenyan payslip. Take-home pay is gross salary minus PAYE, minus the Social Health Insurance Fund (SHIF) contribution, minus NSSF, and minus the Affordable Housing Levy. To know what an employee really keeps, you have to apply all four. A PAYE calculator that ignores SHIF, NSSF and the Housing Levy will overstate net pay.
How to calculate PAYE step by step (2026)
Use these steps for any salary. The bands and rates below are the current KRA structure.
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Step 1: Start with taxable pay and apply the bands
The 2026 monthly PAYE bands are: the first KES 24,000 at 10%; the next KES 8,333 (24,001 to 32,333) at 25%; the next KES 467,667 (32,334 to 500,000) at 30%; the next KES 300,000 (500,001 to 800,000) at 32.5%; and anything above KES 800,000 at 35%. Tax each slice at its own rate and add them up to get gross tax.
- 2
Step 2: Subtract personal relief
Every resident employee gets a personal relief of KES 2,400 per month. Subtract it from the gross tax. If an employee earns below about KES 24,000 a month, the relief usually cancels the tax entirely, so their PAYE is nil. Insurance and other reliefs, where they apply, are deducted here too.
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Step 3: Deduct SHIF
The Social Health Insurance Fund replaced NHIF. SHIF is charged at 2.75% of gross salary with no upper cap, so a KES 60,000 salary contributes KES 1,650 and a KES 200,000 salary contributes KES 5,500. SHIF is a deduction from pay, separate from PAYE.
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Step 4: Deduct NSSF
Under the NSSF Act 2013, contributions are tiered. From February 2026 (Phase 4 of the Act), Tier I covers pensionable pay up to KES 9,000 and Tier II covers KES 9,001 to 108,000, with the employee contributing 6% in each tier and the employer matching it. The maximum employee deduction is KES 6,480 per month (on pay of KES 108,000 and above), and NSSF reduces PAYE-taxable pay.
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Step 5: Deduct the Affordable Housing Levy
The Housing Levy is 1.5% of gross salary, deducted from the employee and matched by the employer. On KES 60,000 that is KES 900; on KES 200,000 it is KES 3,000. Like SHIF, it is a payroll deduction separate from PAYE.
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Step 6: Arrive at net pay
Net (take-home) pay = gross salary − PAYE − SHIF − NSSF − Housing Levy. This is the figure that should land in the employee's account or M-Pesa. Run the same five deductions for every employee, every cycle, and remit each to the right body by its deadline.
Worked examples and common payroll mistakes
Worked example: KES 30,000 gross
Gross tax: 10% of 24,000 = 2,400, plus 25% of 6,000 = 1,500, total 3,900. Less personal relief 2,400 = PAYE 1,500. SHIF at 2.75% = 825. Housing Levy at 1.5% = 450. After NSSF, take-home is roughly KES 26,000. A small earner still pays SHIF and the levy even when PAYE is low.
Worked example: KES 100,000 gross
Gross tax: 2,400 (first band) + 2,083 (25% band) + 20,300 (30% on 67,667) = 24,783. Less relief 2,400 = PAYE 22,383. SHIF 2,750. Housing Levy 1,500. After NSSF at the February 2026 rates (KES 6,000 on a 100,000 gross), take-home is roughly KES 67,000-68,000. The 30% band does most of the work at this level.
Mistake: forgetting personal relief
The single most common payroll error is computing gross tax and remitting it without subtracting the KES 2,400 monthly relief. That over-deducts every employee by 2,400 a month. Always apply the relief before arriving at PAYE.
Mistake: still using NHIF instead of SHIF
NHIF was replaced by SHIF at 2.75% of gross with no cap. Payrolls still using old NHIF bands under-deduct higher earners and over-deduct lower earners. Update your payroll to the SHIF percentage.
Mistake: missing the 9th-of-the-month deadline
PAYE, SHIF, NSSF and the Housing Levy must be remitted by their monthly deadlines (PAYE by the 9th). Late remittance attracts penalties and interest. Automating the calculation and keeping clean records is the simplest way to never miss a deadline.
A Nairobi restaurant runs payroll for five staff
A restaurant in Nairobi employs five people: two waiters on KES 25,000, a cook on KES 40,000, a supervisor on KES 70,000 and a manager on KES 120,000. Every month the owner used to work out each salary by hand, and twice in a year she over-deducted PAYE because she forgot the personal relief on the waiters, who should have paid almost nothing.
Once she standardised the five-step method, the numbers became predictable. The waiters paid little or no PAYE after relief but still contributed SHIF and the Housing Levy. The manager on KES 120,000 carried most of the PAYE because part of his salary sits in the 30% band. She now produces a payslip for each employee showing gross pay, PAYE, SHIF, NSSF, Housing Levy and net pay, and remits each amount by its deadline.
The payoff was not just accuracy. When she applied for a working-capital facility, the lender asked for verified payroll records. Because every cycle was calculated the same way and stored, she exported a clean twelve-month payroll history in minutes. Consistent payroll is both a compliance habit and a financing asset.
An unmonitored till is the quietest leak in Kenyan retail: small shortfalls and unrecorded sales add up long before anyone thinks to look.
Veira gives each staff member their own login and a full audit trail, so every sale, void and refund is tied to a name.
How Veira automates PAYE and payroll
Veira calculates PAYE, SHIF, NSSF and the Housing Levy for every employee automatically, so you never apply the bands or the relief by hand. Enter the gross salary once and Veira produces the payslip, the net pay figure and the totals you owe each body, ready to remit by the deadline. Because the same engine runs every cycle, your records stay consistent and audit-ready.
Payroll in Veira sits alongside the rest of your business: the same system that issues KRA eTIMS receipts on every sale and reconciles your M-Pesa payments also runs your staff payments. That means your books, your tax records and your payroll all come from one source of truth, which is exactly what KRA and lenders want to see. You can pay staff straight to M-Pesa or bank from the same dashboard.
For a Kenyan business owner the practical result is fewer errors, no missed deadlines, and payslips your team trusts. You spend minutes on payroll instead of an afternoon, and you stop worrying about whether you applied the relief or the right SHIF rate.
Frequently asked questions
How do I calculate PAYE in Kenya for 2026?
What is the personal relief in Kenya?
How much is SHIF in 2026 and how is it different from NHIF?
What is the Housing Levy and who pays it?
When is PAYE due to KRA?
Does a small business with a few employees still have to deduct PAYE?
Getting PAYE right is about a repeatable method: apply the bands, subtract the relief, then deduct SHIF, NSSF and the Housing Levy to reach net pay. Use the Veira PAYE calculator to run any salary in seconds, and let Veira automate the whole payroll so deductions are correct and deadlines are never missed. See Veira pricing and run your first payroll free.