Making sense of the deductions on your payslip
31 October 2017
By Jacqui Ramakuela, Compliance Specialist at Sage Africa
According to the Kenya Employment Act of 2007, every employee is entitled to a written payslip upon or before the actual payment of a salary or wages.
The law says that your payslip must contain the details about your gross wages or salary and any statutory deductions from your income.
Here are the statutory deductions to look out for on a Kenyan payslip:
- Pay As You Earn (PAYE): An employer should withhold income tax on behalf of the employee and pay it to the Kenya Revenue Authority each month, per the Kenya Income Tax Act. Income tax in Kenya starts at 10% for an employee earning KShs 11 180 a month and rises in five percent increments for each additional KShs 10 534 the employee earns. The top taxation rate is 30% of the taxable income which is more than KShs 42 782 a month, according to the 2017 individual tax rates. For example, if the employee’s monthly taxable pay is KShs 45 000, the PAYE tax would be KShs 8 103.80 before considering the personal reliefs.
- National Social Security Fund (NSSF): This deduction is paid to the NSSF and covers social security contributions for benefits such as retirement and disability insurance. The employee and employer each contribute 6% of the employee’s monthly earnings, subject to limits. An employee’s NSSF contribution is an admissible deduction in arriving at the employee’s taxable pay of the month.
- National Hospital Insurance Fund (NHIF): Employees contribute each month toward a medical insurance cover for themselves and their declared dependents. The NHIF premium is based on gross income, starting at KShs 150 for someone earning less than KShs 6 000 a month and rising up to KShs 1 700 for someone earning KShs 100 000 or more a month. Contributions made to the NHIF are not tax deductible, meaning, they do not affect the PAYE tax calculation.
Smart employers, from small businesses to enterprises, are using software solutions to cater for local tax and legal requirements. All calculations are made automatically and accurately, saving time and giving the employee peace of mind.