KENYA

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"However, this narrow view can overlook one of the most critical roles life insurance plays in retirement planning—serving as an income bridge when retirement income suddenly changes."
— jodfinancial.com

"Gst at 18% applies to that mdr fee, not to the payment amount, and gst registered merchants can claim it back as input tax credit."
— techeconomy.in

"As a result, it has become increasingly complex to defensively plan to limit or avoid exposure to income tax and estate tax laws of northern states."
— coconutpointresidences.com

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Kenya Country Guide

Kenya Payroll and Employer of Record: Employment Contracts

  • Kenya has several classes of work permits:
    • Class A: Those who intend to perform mining or mineral sourcing and trade.
    • Class B: Those who want to invest in agriculture and animal husbandry.
    • Class D: Provided to those who desire to work for a certain employer who has been approved by the government to hire international workers. Suitable for skilled professionals or technical workers. Issued for one or two years and can be renewed.
    • Class G: People who seek to start a specific trade, business, or consulting are given a Class G license.
    • Class I: A member of a missionary society is given Class I status, and he or she must demonstrate to the government that his or her presence benefits Kenyans.
    • Special Pass: This is a document issued to individuals who wish to enter Kenya or remain in Kenya for a limited period of time in order to apply for a review of a decision denying a permit, apply for a permit or pass, or temporarily conduct any business, trade, or profession (i.e., specific employment by a specific employer) for a period of time not exceeding three (3) months.

    Special Pass: This is a document issued to individuals who wish to enter Kenya or remain in Kenya for a limited period of time in order to apply for a review of a decision denying a permit, apply for a permit or pass, or temporarily conduct any business, trade, or profession (i.e. specific employment by a specific employer) for a period of time not exceeding three (3) months.

Annual Vacation

Kenyan employees are allowed to take a minimum of 21 paid days off every year. However, the leave may only be taken if the individual has worked for the same employer for the previous 12 months.

Sick

Employees are entitled to 14 days of sick leave. The first seven days of sick leave are paid at 100% of the usual pay rate, with the remaining days paid at 50% of the regular pay rate. To be eligible for these benefits, the employee must have worked at their current location for at least two months. Furthermore, workers must present a medical certificate before they may use their sick leave.

Maternity

In Kenya, women can take up to 91 days off for maternity leave, which is reimbursed in full by their employers.

The sole requirement of the legislation is that the employee give her employer seven days’ notice before taking time from work so that appropriate modifications may be made. Moreover, the woman has to produce a medical certificate.

Paternity

The law allows a male employee to take two weeks of paternity leave with full pay.

Family

Compassionate leave: Permits an employee to attend to personal catastrophes such as the death, illness, or accidents of family. As a result, it’s usually up to the company’s policy to decide how to address compassionate leave.

Adoptive Leave: Parents who are preparing to adopt are eligible for one month of pre-adoptive leave with full pay. They must provide 14 days’ notice and show the relevant adoption papers.

National Holidays

13 Paid National Holidays

Other Paid Time Off

Election days are declared national holidays

STATUTORY EMPLOYEE BENEFITS

Unemployment

Kenya is yet to enact a Unemployment fund.There was plans to enact one in June of 2022 but they have not been materialized as of yet.

Workers Compensation

  • The Workers Injury Benefits Act (WIBA) in Kenya mandates businesses and organizations to insure themselves against compensating employees for workplace accidents. WIBA insurance coverage protects employers from legal liability related to these incidents. The insurance is paid annually and its cost depends on factors such as the industry, employee salaries, and the insurance provider.

  • Under the Labour Laws regarding Health and Safety Act 2007, the WIBA Insurance coverage protects you as an employer from legal liability.

  • The price of a WIBA Insurance Policy in Kenya varies depending on the insurance company you choose. However, the cost will vary depending on the coverage package you choose.

  • It might be expensive or cheap, depending on the coverage plan you choose to meet your organization’s or company’s insurance needs.

  • It’s important to note that the benefits are determined depending on your employees’ salaries as well as the kind of work-related illnesses and disorders. It’s critical that you maintain track of your employees’ earnings in order to make determining compensation benefits easier.

Social Security

The new NSSF act requires contributions of 12% of an employee’s pensionable earnings, split equally between employer and employee at 6% each.

For 2024, contributions are categorized into two tiers:

  • Tier I: Up to KES 7,000 of earnings, with a maximum contribution of KES 840.
  • Tier II: Earnings between KES 7,000 and KES 36,000, with a maximum contribution of KES 4320.

Benefits include :

  • Retirement
  • Withdrawal
  • Survivors
  • Invalidity
  • Emigration benefits.

 

Retirement

Covered through Social Security ( NSSF ) contributions.

Health

Employers must deduct and remit National Hospital Insurance Fund (NHIF) contributions monthly by the 9th of the following month. Employees contribute up to KES 1,700 per month, with no employer contribution required. From January 2022, employees receive a 15% tax relief on NHIF contributions.

The Fund’s primary mission is to offer medical insurance to all of its members and their stated dependents (spouse and children).

Life insurance is a private option and is based on an employee voluntary basis to sign up or for the employer to offer it.

PRIVATE EMPLOYEE BENEFITS

Workers Compensation

Private worker’s compensation available.

Retirement

  • Private retirement schemes available.

  • A defined contribution pension is the most common type of pension. On retirement, the amount your defined contribution pension is worth depends on how much money you’ve contributed and the performance of your investments. Most modern workplace and personal pensions are defined contribution pensions.

  • A defined benefit pension (also called a ‘final salary’ pension) is a type of workplace pension that pays you a retirement income based on your salary and the number of years you’ve worked for the employer, rather than the amount of money you’ve contributed to the pension.

  • Early retirement available at 55 for defined contribution schemes.

Health

  • Private health insurance available.

  • Many private providers.

  • You can claim for in-hospital care, as well as additional benefits like disease tests, day-to-day expenses like medicine or GP visits, and dental treatment, depending on your medical aid plan.

Insurance

  • Group life insurance available.

  • Approved and unapproved insurance.

  • Approved means premiums are tax deductible. Pay-out is taxable.

  • Unapproved means premiums are taxed as income. Pay-out is not subject to tax.

PERSONAL INCOME TAX

Tax Year

Tax year runs 1 July – 30 June.

Tax Tables

Effective 1 July 2023, the tax rates applicable to taxable income are tabulated as follows:

Annual taxable income (KES*) Tax rate (%)
On the first 288,000 10
On the next 100,000 25
On the next 5,612,000 30
On the next 3,600,000 32.5
On all income over 9,600,000 35

* Kenyan shillings

Resident individuals are entitled to a personal relief of KES 2,400 per month.

 

Taxation Method

Tax is calculated using a progressive taxation method.

Double Taxation

Kenya is signatory to multiple double taxation agreements, also known as a DTA.

Residence Requirements

In Kenya, a person is regarded to be a tax resident if they:

  • have a permanent home in Kenya and were present in Kenya for any period in a particular year of income under consideration, or do not have a permanent home in Kenya but were:
  • present in Kenya for 183 days or more in that year of income, or;
  • present in Kenya in that year of income and the two preceding years of income for periods averaging more than 122 days in each year of income.

Payroll Calendars

There are no predetermined dates on which employees must be paid.

Weekly, Bi-weekly, fortnightly and monthly payrolls are acceptable.

Rebates & Tax Credits

In Kenya there is little personal tax relief.

  • Residents are entitled to a personal relief of KES 28,800 per annum or KES2,400 per month. When an employee works for more than one employer, they can only claim personal relief credit via one of them. Non-Residents are not entitled to any personal relief.
  • Effective January 2022, employees will receive a 15% tax relief on their NHIF contributions.
  • Residents are also entitled to an insurance relief of 15% of the premium amount. However, this may not exceed KES 60,000 per annum.

Health Insurance

Employers must deduct and remit National Hospital Insurance Fund (NHIF) contributions monthly. The Fund’s primary mission is to offer medical insurance to all of its members and their stated dependents (spouse and children). Private medical aid/health insurance is also available.

Unemployment

  • Currently there is no provision in law for unemployment insurance and benefits.

Social Security

The new NSSF act requires contributions of 12% of an employee’s pensionable earnings, split equally between employer and employee at 6% each.

For 2024, contributions are categorized into two tiers:

  • Tier I: Up to KES 7,000 of earnings, with a maximum contribution of KES 840.
  • Tier II: Earnings between KES 7,000 and KES 36,000, with a maximum contribution of KES 4320.

Benefits include : Retirement, withdrawal, survivors, invalidity and emigration benefits.

PAYROLL ELEMENTS

Income

Forms of income in Kenya include :

  • Business income
  • Employment income
  • Rent income
  • Dividend and Interests
  • Pension income
  • Income from a Digital Marketplace

Pension income

  • Income from a Digital Marketplace

  • Natural resource income among others

Bonuses

  • 13th month bonuses are not mandatory by law and are based solely on the employer’s discretion.

Allowances

No specific allowances are mandatory by law.

Benefits in Kind

Non-cash gains or profits from employment are taxable. These include:

  • Provision of a motor vehicle by the employer (car benefit)
  • Employer-provided housing
  • Loans at interest rates below the prevailing market rate
  • Household utilities such as telephone, electricity, water, and security services exceeding the allowable limit of KES 3,000 per month
  • Pension contributions paid by a tax-exempt employer to an unregistered scheme

Investment Income

Withholding Tax ( WHT ) is deducted at source from the following sources of income:

  • Interest
  • Dividends
  • Royalties
  • Management or professional fees (including consultancy, agency or contractual fees)
  • Commissions
  • Pensions
  • Rent received by non-residents
  • Other payments specified

Retirement Funding

Covered through Social Security ( NSSF ) contributions.

 

Health Insurance

Employers must deduct and remit National Hospital Insurance Fund (NHIF) contributions monthly by the 9th of the following month. Employees contribute up to KES 1,700 per month, with no employer contribution required. From January 2022, employees receive a 15% tax relief on NHIF contributions.

The Fund’s primary mission is to offer medical insurance to all of its members and their stated dependents (spouse and children).

Risk Insurance

Life insurance is a private option and is based on an employee voluntary basis to sign up or for the employer to offer it.

Taxable Income

Examples of amounts an individual may receive, and from which the taxable income is determined, include;

  • Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
  • Profits or losses from a business or trade
  • Income or profits arising from an individual being a beneficiary of a trust
  • Director’s fees
  • Investment income, such as interest and foreign dividends
  • Rental profit or losses
  • Income from royalties
  • Annuities
  • Pension income
  • Certain capital gains

Allowable Deductions

Premiums paid for an education policy, health policy or life insurance can be deducted from tax payable, provided that the employee has proof of the payment to the policy, and that the premiums paid for the policy have a maturity period of at least 10 years. The deduction for the insurance relief is at 15% of premiums paid subject to a maximum KES 5,000 per month and/or KES 60,000 per annum.

In addition, deductions in respect of contributions made to a registered pension fund shall be limited to KES 20,000 per month of service or a maximum of KES 240,000 per annum.

PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS

Payroll Taxes

Other than the WIBA, NSSF and NHIF the following taxes apply:

  • Affordable Housing Levy (AHL)

As of July 2023, the Affordable Housing Levy requires employers to deduct 1.5% of an employee’s gross monthly salary and match this amount. This includes basic salary and regular cash allowances but excludes non-cash benefits and irregular payments. The levy must be remitted within nine working days after the end of the month, with a 2% penalty for late payments.

  • NITA Contributions

All employers must pay a monthly levy of KES 50 per employee to the Directorate of Industrial Training, except for those already paying the tourism levy.

Unemployment

Currently there is no provision in law for unemployment insurance and benefits.

Social Security

The new NSSF act requires contributions of 12% of an employee’s pensionable earnings, split equally between employer and employee at 6% each.

For 2024, contributions are categorized into two tiers:

  • Tier I: Up to KES 7,000 of earnings, with a maximum contribution of KES 840.
  • Tier II: Earnings between KES 7,000 and KES 36,000, with a maximum contribution of KES 4320.

Benefits include : Retirement, withdrawal, survivors, invalidity and emigration benefits.

Workers Compensation

The Workers Injury Benefits Act (WIBA) in Kenya mandates businesses and organizations to insure themselves against compensating employees for workplace accidents. WIBA insurance coverage protects employers from legal liability related to these incidents. The insurance is paid annually and its cost depends on factors such as the industry, employee salaries, and the insurance provider.

ADMINISTRATION

Income

Income tax is filed monthly using the online KRA E-Filing service.

Payments are due by the 9th of the month. If the 9th falls on a weekend or public holiday then the payments are due on the prior working day.

Penalty of 5% of the amount due is levied for late payment and then 1% per month on the unpaid tax until the tax is paid in full.

Payroll Taxes

Other than the WIBA, NSSF and NHIF the following taxes apply:

  • Affordable Housing Levy (AHL)

The levy must be remitted within nine working days after the end of the month, with a 2% penalty for late payments.

  • NITA Contributions

The levy must be remitted within nine working days after the end of the month.

Unemployment

Kenya is yet to enact a Unemployment fund.

Social Security

    • NSSF payments are made along with employee income tax.
    • The benefits include:
    • Retirement Benefit: Available to members aged 55 or older, or those retiring from regular employment.
    • Withdrawal Benefit: Available to members aged 50 or older who have retired from regular paid employment.
    • Survivors Benefit: Paid to the dependents or relatives of a deceased member.
    • Invalidity Benefit: Paid to members certified as permanently incapable of working due to physical or mental disability, or those aged 50 or older with a permanent partial incapacity preventing employment.
    • Emigration Benefit: Available to members emigrating from Kenya to a non-East African Community country, with no intention of returning.

 

Workers Compensation

WIBA benefits are determined depending on the employees’ salaries, the kind of work-related illnesses and disorders applicable in their industry as well as the supplier.

Statutory Benefits

Kenya currently has a national health insurance program that covers all citizens’ essential basic health needs. Employers can however provide private health insurance options.

Employee Benefits

These include national holidays, yearly leave, maternity leave and paternity leave.

LEGISLATION

  • The Employment Act, 2007
  • The Labour Relations Act, 2007
  • The Occupational Safety and Health Act, 2007
  • The Work Injury Benefits Act, 2007
  • The Labour Institutions Act, 2007

STATUTORY BODIES

  • NSSF
  • Ministry of Labour and Social Protection
  • Ministry of Health
  • National Hospital Insurance Fund

https://www.president.go.ke/
https://www.nssf.or.ke/