What is deducted from a salary in Kenya?

Four statutory deductions come off a Kenyan salary: NSSF (two tiers), SHIF at 2.75% of gross, the Affordable Housing Levy at 1.5% of cash pay, and PAYE on what remains after those three. They are obligations, not options.

What order are payroll deductions taken in Kenya?

NSSF, SHIF and the Housing Levy come off gross pay first. What is left is taxable pay, and PAYE is charged on that. Personal relief then comes off the computed tax, not off the income. Anything else — a salary advance, a SACCO deduction, a court order — comes off the net figure afterwards and does not change the tax.

Is the Housing Levy charged on non-cash benefits?

No, on the definition everyone works to. The Affordable Housing Act 2024 charges 1.5% of "gross monthly salary" and defines neither that phrase nor "employee". KRA's 15 August 2023 notice reads it as basic salary plus regular cash allowances, with non-cash benefits and irregular payments outside the base. A car or telephone benefit therefore raises PAYE but not the levy.

Statutory Deductions in Kenya — The Order They Come Off

Q: Does the Housing Levy reduce taxable income?

Yes. This is widely reported the other way round. The 15% Affordable Housing relief was repealed on 27 December 2024 and replaced the same day by an allowable deduction before the tax bands, under section 15(2) of the Income Tax Act as amended by the Tax Laws (Amendment) Act 2024. The levy therefore reduces taxable pay rather than earning a relief against tax. Anyone can check it against their own P9.

Q: Is SHIF deducted before PAYE?

Yes. SHIF is an allowable deduction against taxable income under the same 2024 amendment that made the Housing Levy deductible, so it comes off gross pay before the PAYE bands are applied. SHIF carries no separate tax relief — the deduction is the relief. The NHIF relief it replaced ended with NHIF.

Q: Is taxable pay the same as gross pay?

No. NSSF, SHIF and the Housing Levy come off before tax is worked out. PAYE is charged on the balance after those three — taxable pay — not on gross. This is the most misunderstood step in Kenyan payroll.

Q: Why does the payroll month decide the deduction?

Because the statutory tables change in February, not January. The NSSF Act 2013 phase-in lifts the Tier II earnings ceiling every February, so January payroll is computed on the previous year's table and the eleven months after it are not. A tax year is not a calendar year.

Four deductions are taken from a Kenyan salary by law, and the order they are taken in decides the answer. Three of them come off gross pay before tax is worked out; PAYE is charged on what is left. Get the order wrong and every figure below it is wrong — which is why this page starts there rather than with a rate table.

What order are payroll deductions taken in?

This is the whole mechanic, and it is the step most pages skip.

One month’s pay, in the order the law takes it
Step	What happens
1. Gross pay	Basic salary plus cash allowances, plus the value of any non-cash benefit for tax purposes.
2. NSSF	Two tiers, off gross. The employer matches the employee share shilling for shilling.
3. SHIF	Charged on gross pay and floored at a monthly minimum, so a low salary pays the floor rather than the percentage.
4. Housing Levy	Charged on cash pay. The employer matches it.
5. Taxable pay	Gross less the three above, and less any allowable pension contribution. This, not gross, is what the PAYE bands are applied to.
6. PAYE	The bands are charged on taxable pay. Personal relief then comes off the computed tax — not off the income.
7. Net pay	What reaches the bank. Anything else — a salary advance, a SACCO deduction, a court order — comes off here, after tax, and changes nothing above it.

The current figure for each row is on the Kenyan tax rates page, with the statute section and the date it took effect against it. Put a real salary through the net pay calculator and you are watching these seven steps run.

Does the Housing Levy reduce taxable income?

Yes — and a great deal of published guidance still says otherwise. The 15% Affordable Housing relief was repealed on 27 December 2024. On the same day it was replaced by an allowable deduction, taken before the tax bands, under section 15(2) of the Income Tax Act as amended by the Tax Laws (Amendment) Act 2024.

The distinction is not academic. A relief comes off the tax; a deduction comes off the income the tax is charged on. Pages that read the repeal without the substitution conclude that the levy stopped reducing your tax altogether — which is wrong for every employee in the country, not only ones with benefits. Anyone can settle it against their own P9: if the levy appears among the deductions that produce taxable pay, it is a deduction.

Our engine takes it that way, and the engine that decides this page’s position is the same one that writes the payslips.

Is SHIF deducted before PAYE?

Yes. SHIF became an allowable deduction against taxable income under the same 2024 amendment that made the Housing Levy deductible, so it comes off gross before the bands are applied. It carries no separate relief — the deduction is the relief. The NHIF relief it replaced ended with NHIF in October 2024, and a payslip still showing one is running an out-of-date table.

Is taxable pay the same as gross pay?

No, and this is the most misunderstood step in Kenyan payroll. NSSF, SHIF and the Housing Levy come off before tax is worked out. PAYE is charged on the balance after those three. Reading the PAYE band table against a gross salary overstates the tax on every salary above the first band.

What each deduction is

Rates and thresholds live on the tax rates page, which is printed by the payroll engine itself. This is what each one is for.

NSSF

The national pension contribution, in two tiers under the NSSF Act 2013. The employer matches the employee share. Tier II may be paid into an employer’s own registered scheme instead of to the Fund — that moves where the money goes, not whether it is deducted.

SHIF

The Social Health Insurance Fund, which replaced NHIF in October 2024. Charged at 2.75% of gross pay with a monthly floor, so the lowest salaries pay the floor rather than the percentage. Unlike NHIF it is a percentage rather than a banded table.

Affordable Housing Levy

1.5% of cash pay under the Affordable Housing Act 2024, matched by the employer. The Act charges “gross monthly salary” and defines neither that phrase nor “employee”; the reading everyone works to is KRA’s 15 August 2023 notice — basic salary plus regular cash allowances, with non-cash benefits and irregular payments outside the base. So a car or telephone benefit raises PAYE but not the levy — the housing levy calculator shows the split on a real figure.

PAYE

Pay As You Earn, the income tax itself, charged in bands on taxable pay and remitted by the employer to the Kenya Revenue Authority (KRA). Personal relief comes off the computed tax. The band-by-band working is on the PAYE calculator.

Can a statutory deduction be switched off?

No. PAYE, NSSF, SHIF and the Housing Levy are obligations, not options, so all four always apply. The single legitimate exception is paying NSSF Tier II to your own registered scheme, which moves where the money goes without changing what is deducted.

Why the payroll month decides the answer

The statutory tables change in February, not January. The NSSF Act 2013 phase-in lifts the Tier II earnings ceiling every February, so January payroll runs on the previous year’s table and the eleven months after it do not. A tax year is not a calendar year, and a calculator that only knows “this year’s rates” is wrong every January. The February seam is set out on the rates page.

What is not a statutory deduction

Salary advances, SACCO contributions, staff loans, welfare contributions, union dues and court-ordered attachments are all deductions from pay, but none of them is statutory and none of them changes taxable pay. They come off the net figure at step 7. A voluntary pension contribution is the one that behaves differently: within the allowable annual limit it reduces taxable pay like the statutory three, which is why the engine treats it at step 5 rather than step 7.

Where this comes from

The Income Tax Act (s.15(2), as amended by the Tax Laws (Amendment) Act 2024), the NSSF Act 2013, the Social Health Insurance Act 2023 and the Affordable Housing Act 2024, plus KRA’s public notices. Where the law is silent — the levy’s treatment of irregular pay is the live example — we say so and give the reasoning rather than picking an answer quietly. The sourcing hierarchy and the open questions are set out in full on the methodology page. This page is an explanation, not tax advice, and it is not a substitute for your own adviser on a particular case.

Statutory positions on this page last verified against the Acts and KRA notices on 10 August 2026, by XELQ Ltd. Rates themselves are printed by the payroll engine, so they move with it.

Statutory deductions in Kenya.