Employer Guide — 2026

Kenya Employer Payroll Compliance 2026

For HR managers, SME owners, and finance teams. Everything you need to know about PAYE, NSSF, SHIF, 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	+Employer SHIF	Total Cost	Overhead %
Ksh 50,000	Ksh 3,000	Ksh 750	Ksh 687.5	Ksh 54,437.5	+8.9%
Ksh 100,000	Ksh 4,320	Ksh 1,500	Ksh 1,375	Ksh 107,195	+7.2%
Ksh 150,000	Ksh 4,320	Ksh 2,250	Ksh 2,062.5	Ksh 158,632.5	+5.8%
Ksh 250,000	Ksh 4,320	Ksh 3,750	Ksh 3,437.5	Ksh 261,507.5	+4.6%

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

9thof month

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.

⚠️ Late: 5% of tax due + 1% per month interestPlatform: itax.kra.go.ke

9thof month

Remit SHIF Contributions

Social Health Insurance Fund: 1.375% employee + 1.375% employer of each employee's gross salary. Remit via SHA portal or through KRA payroll integration.

⚠️ Late: 2% monthly on outstanding balancePlatform: sha.go.ke / itax.kra.go.ke

9thof month

Remit Housing Levy

Affordable Housing Levy: 1.5% employee + 1.5% employer of gross salary for every employee. Remitted via KRA iTax alongside PAYE.

⚠️ Late: 5% + 1% per monthPlatform: itax.kra.go.ke

15thof month

Remit NSSF Contributions

Employee NSSF (6% of pensionable pay, max KES 72,000) plus matching employer contribution. File via NSSF employer portal or M-Pesa Paybill 333300.

⚠️ Late: 5% of contribution + 1% monthly interestPlatform: nssf.or.ke

Annual Obligations

January 31

Issue P9 certificates to all employees

February 28

File NSSF annual return

March 31

File employer annual IT2C return via iTax

Ongoing

E-TIMS receipts for all business expenses

November 30

PAYE annual reconciliation — resolve discrepancies before year-end

New Employee Payroll Checklist

Request KRA PIN from employee on day 1 — file their PAYE from first salary

Collect mortgage, pension, and insurance documentation to apply applicable reliefs from day 1

Verify national ID for PAYE records

Add to P10 return from the month employment begins

Inform employee of their right to a P9 form at year-end

If hiring a Person with Disability (PWD), collect NCPWD card for KES 150,000 monthly relief

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.

❌ Forgetting employer SHIF is now mandatory

Consequence: Unlike NHIF (employee-only), SHIF requires an equal employer contribution. Omitting this understates your payroll cost and creates a compliance liability.

Fix: Budget 1.375% of each employee's gross salary as an additional employer cost when hiring.

❌ 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.