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Part of the guideRunning payroll in Nigeria, Ghana and Kenya: an employer's guide
The short answer
Kenyan employers deduct two health and housing contributions from every employee's gross salary: the Social Health Insurance Fund (SHIF) at 2.75%, with a minimum of KSh 300 a month and no cap, and the Affordable Housing Levy at 1.5%, which the employer matches with another 1.5%. SHIF is paid to the Social Health Authority by the 9th of the following month, and the housing levy to the Kenya Revenue Authority within nine working days after the month ends. Both employee contributions are deducted before PAYE is calculated.
Two of Kenya's payroll deductions are less than three years old, and both changed how PAYE is calculated in December 2024. SHIF replaced the National Hospital Insurance Fund, and the Affordable Housing Levy was put on a new legal footing in 2024. This article covers what to deduct, where to pay it and what happens if you are late. For PAYE bands, NSSF and the Nigeria and Ghana rules, see our guide to payroll in Nigeria, Ghana and Kenya.
The two contributions at a glance
| SHIF | Affordable Housing Levy | |
|---|---|---|
| Law | Social Health Insurance Act, 2023 | Affordable Housing Act, 2024 |
| Employee rate | 2.75% of gross salary | 1.5% of gross salary |
| Employer rate | None | 1.5% of gross salary, on top of pay |
| Minimum or cap | Minimum KSh 300 a month; no cap | No minimum; no cap |
| Paid to | Social Health Authority (SHA) | Kenya Revenue Authority (KRA), via iTax |
| Deadline | 9th of the following month | 9th working day after the end of the month |
| Late penalty | 2% of the unpaid amount | 3% a month on the unpaid amount |
| Tax treatment | Employee share deductible before PAYE | Employee share deductible before PAYE; employer share deductible for the business |
SHIF: the Social Health Insurance Fund
SHIF is run by the Social Health Authority and funds health cover for members and their dependants. The Social Health Insurance Act, the Digital Health Act and the Primary Health Care Act replaced the NHIF Act, and after a period of litigation the Court of Appeal allowed implementation to proceed in September 2024.
Employers deduct 2.75% of each employee's gross salary, with a floor of KSh 300 a month. Unlike the old NHIF scale, there is no upper limit, so a senior employee on KSh 1,000,000 a month contributes KSh 27,500. The employer pays nothing of its own into SHIF, but must register employees and remit by the 9th of the following month.
Late payment carries a penalty of 2% of the unpaid contribution. The Act also makes it an offence for an employer to fail to remit without lawful excuse or to make unauthorised deductions, with fines of up to KSh 2 million, imprisonment of up to three years, or both.
The Affordable Housing Levy
The levy funds the government's affordable housing programme. Both employer and employee pay 1.5% of the employee's gross monthly salary, so the total is 3%. It took effect under the Affordable Housing Act on 19 March 2024, after an earlier version introduced through the Employment Act was struck down.
How to pay it
- Declare the levy for each employee on sheet M of the monthly PAYE return on iTax.
- Generate a payment slip under the tax head 'agency revenue' and sub-head 'Housing Levy'.
- Pay at a KRA agent bank or through eCitizen Paybill 222222.
- Pay within nine working days after the end of the month in which the salary was due.
Late payment attracts a penalty of 3% of the unpaid amount for each month it remains outstanding, recoverable as a civil debt. Note that the levy's deadline is counted in working days, so it usually falls a few days after the PAYE and SHIF deadline of the 9th. The payroll deadlines article shows the dates for a sample month.
Why the order of deductions matters
Since the Tax Laws (Amendment) Act, 2024 took effect in December 2024, the employee's SHIF and housing levy contributions are deducted from gross pay before PAYE is calculated, alongside pension contributions (up to KSh 30,000 a month). The order on the payslip is therefore:
- Gross pay.
- Less NSSF (see our article on Kenya NSSF rates).
- Less SHIF at 2.75%.
- Less housing levy at 1.5%.
- Equals taxable pay; apply the PAYE bands, then subtract personal relief of KSh 2,400.
Worked example: KSh 60,000 a month
| Line | Amount (KSh) | Notes |
|---|---|---|
| Gross pay | 60,000 | |
| NSSF | −3,600 | Tier I 540 + Tier II 3,060 |
| SHIF (2.75%) | −1,650 | |
| Housing levy (1.5%) | −900 | |
| Taxable pay | 53,850 | |
| Tax before relief | 10,938.35 | 2,400 + 2,083.25 + 6,455.10 |
| Personal relief | −2,400 | |
| PAYE | −8,538.35 | |
| Net pay | 45,311.65 | |
| Employer housing levy | 900 | Employer cost, on top of gross |
If SHIF and the housing levy were not deductible, taxable pay would be KSh 56,400 and PAYE KSh 765 a month higher, because the extra KSh 2,550 would be taxed at 30%. Over a year, the deductibility is worth KSh 9,180 to this employee.
Low earners and the SHIF minimum
For an employee earning KSh 10,000, 2.75% would be KSh 275, but the KSh 300 minimum applies. Payroll systems that simply multiply by 2.75% under-deduct for anyone earning less than about KSh 10,910 a month.
A monthly checklist for SHIF and the levy
- Confirm every new employee is registered with the Social Health Authority before their first payroll.
- Calculate SHIF at 2.75% of gross pay, apply the KSh 300 floor, and do not cap it.
- Calculate both halves of the housing levy at 1.5% of gross pay each, including allowances that form part of gross salary.
- Deduct the employee's SHIF and levy before PAYE, then apply the bands and personal relief.
- Set aside the SHIF, the employee's levy and the employer's levy on pay day, not on the deadline.
- Remit SHIF by the 9th, and declare and pay the levy on iTax within nine working days after month end.
- Keep the SHA and KRA receipts with the payroll records, and reconcile them each month.
Most problems come from three places: systems that still carry the old NHIF bands, systems that apply SHIF after PAYE rather than before, and employers who treat the housing levy as a once-a-quarter payment. Each is easy to fix once spotted, but arrears and penalties build up quietly until KRA or the SHA raises an assessment. A second person checking a sample of payslips each month is the cheapest control available.
Where Pryme fits
Pryme payroll covers Kenya as well as Nigeria and Ghana. The Pryme business account holds NGN, USD, GBP and EUR, so ask us how shilling salaries and remittances are funded and paid before you plan your first Kenya run. Whatever the route, the duties in this article stay with you as employer: set PAYE, SHIF, NSSF and both halves of the housing levy aside on pay day and remit SHIF by the 9th and the levy within nine working days of month end. Above a threshold you set, a second named approver must sign off before money moves, and bulk payouts check account names before you approve. For the rest of the Kenyan rules and a side-by-side comparison with Nigeria and Ghana, read the three-country payroll guide.
Questions people ask
How much is SHIF deduction in Kenya?
2.75% of gross salary, with a minimum of KSh 300 a month and no maximum. It is deducted from the employee and paid to the Social Health Authority by the 9th of the following month.
Does the employer pay SHIF in Kenya?
No. SHIF is deducted from the employee's salary only. The employer's duty is to register employees, deduct the correct amount and remit it on time.
How much is the housing levy in Kenya?
1.5% of gross salary from the employee, matched by 1.5% from the employer, so 3% in total. There is no cap.
Is the housing levy tax deductible in Kenya?
Yes. Since December 2024 the employee's housing levy contribution, like SHIF, is deducted before PAYE is calculated. The employer's contribution is an allowable deduction for the business.
When is the housing levy due?
Within nine working days after the end of the month in which the salary was due, declared on the PAYE return on iTax.
Sources
- PwC Worldwide Tax Summaries: Kenya, individual, other taxes · accessed Oct 2026
- Vialto Partners: Kenya, the Social Health Insurance Fund (SHIF) · accessed Oct 2026
- Kenya Revenue Authority: Collection of the Affordable Housing Levy · accessed Oct 2026
- Kenya Revenue Authority: PAYE · accessed Oct 2026
- DLA Piper: Recent employment law reforms in Kenya · accessed Oct 2026
- Business Daily: Workers gain as KRA grants tax relief on housing levy, SHIF · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.