The 2026 statutory snapshot
October 2026 rates - confirm against KRA, SHA and NSSF notices before acting. SHIF replaced NHIF in October 2024 at 2.75% of gross pay (minimum KES 300, no cap, deductible before PAYE). NSSF is 6% of pensionable pay with Tier I on the first KES 9,000 and Tier II up to KES 108,000 (February 2026 limits, maximum KES 6,480 each side). The Affordable Housing Levy is 1.5% from the employee plus 1.5% from the employer with no cap. The NITA levy is KES 50 per employee per month, borne by the employer. This page is general information, not tax advice.
Your monthly compliance calendar
PAYE, SHIF and the Housing Levy are due by the 9th of the following month; confirm the current NSSF due date on the NSSF portal before you diarise it. The Finance Act 2026 (assented 23 June 2026) lets KRA recover unpaid levies such as the Housing Levy as though they were unpaid tax - late or missed remittances now carry sharper teeth. A penalty and interest amnesty for periods up to 31 December 2025 requires the full principal to be settled by 31 December 2026.
Terminations done by the book
Section 41 procedure is the number-one source of disputes: before terminating for misconduct or poor performance, explain the reason in a language the employee understands, in the presence of a fellow employee or union representative of their choice, and hear and consider their response. The employer must prove the reason (s.43); a termination without a valid, fair reason or a fair procedure is unfair (s.45). State the reason, record the response, track notice, keep a timestamped trail.
Compliance is a process, not a checklist
The biggest compliance risk is rarely not knowing a rule - it is a process that works differently in practice. Centralise the current policy so people know where it lives. Standardise recurring processes instead of reinventing them. Keep evidence: policies acknowledged, records retained, casual-to-term conversion flagged under Section 37, with Section 5 discrimination guardrails. Review regularly, because employment requirements and your own practices both change. Written terms are required for engagements over three months; probation is capped at six.
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Make compliance the default.
See contracts, deductions and termination workflows that follow Kenyan rules from day one.
- 500K
- KSh maximum penalty exposure avoided (sample)
- 41
- Section 41 termination trail, documented (sample)
- 4
- statutory deductions tracked: PAYE, NSSF, SHIF, Housing Levy (sample)
Frequently asked questions
What changed for payroll in the Finance Act 2026?
Gratuity contributions can be tax-exempt where the contract runs at least three continuous years within limits; KRA can recover unpaid levies such as the Housing Levy as though unpaid tax; and a penalty and interest amnesty needs the principal settled by 31 December 2026. Confirm your position with a qualified accountant or KRA - this is general information.
Does HappeeHR calculate NSSF, SHIF and PAYE automatically?
Yes - statutory deductions are tracked against current rates inside payroll, with changes flagged when laws or rates move. Always confirm current rates against official notices before acting.
Can HappeeHR help with a termination process?
Yes - the documented workflow follows the Section 41 procedure: reason stated in understandable language, right to respond with a witness present, notice tracked, all timestamped. This supports your process; it is not legal advice.
How long can probation last in Kenya?
Probation is capped at six months. HappeeHR tracks probation end dates so no one drifts past the cap unnoticed.
When must employment terms be in writing?
Written terms are required for engagements over three months. Contract templates in HappeeHR include them from the start.
What is casual-to-term conversion?
Under Section 37, qualifying casual engagements convert to term contracts. HappeeHR flags engagements approaching conversion so you act in time.