Kenya NSSF and Housing Levy: employer payroll guide 2025

Kenya employers managing payroll in 2025 are navigating three layers of statutory deductions that have each changed since 2022: NHIF became SHA, NSSF reforms are still working through the courts, and the Housing Levy arrived. Getting any one of them wrong means underpaying a regulator or over-deducting from employees — and the Kenya Revenue Authority's iTax system now flags discrepancies faster than it used to.

This guide covers the NSSF reform history and current practical position, the Affordable Housing Levy, SHA (with a link to our full SHA article), and what the combined stack looks like on a real payslip.

Why three statutory lines changed at once

The NHIF-to-SHA transition (1 October 2024), the NSSF Act 2013 reform litigation, and the Finance Act 2023 Housing Levy were legislated under different statutes at different times — but they all landed in the 2024–2025 payroll cycle at the same time. Employers who updated for SHA and ignored the Housing Levy, or who applied the old NSSF rates without understanding the Tier II litigation, have accumulated compliance gaps.

1. NSSF — the reform that is still being resolved

The old scheme (pre-reform)

Under the original NSSF Act of 1965 (later Cap 258), contributions were flat:

• Employee: KES 200/month
• Employer: KES 200/month

These were fixed nominal amounts, unchanged for decades, and were widely regarded as inadequate for any meaningful social insurance. They are still what most Kenyan payrolls apply today while litigation is active.

The NSSF Act 2013 reform

Parliament enacted the NSSF Act 2013 to shift to a percentage-based, tiered contribution model:

• Tier I: contributions on the lower earnings limit (LEL), set at the then-national minimum wage — approximately KES 6,000/month. Rate: 6% employer + 6% employee.
• Tier II: contributions on pensionable pay above the LEL up to the upper earnings limit (UEL), set at a multiple of the LEL. Rate: 6% employer + 6% employee on the upper band.

For a higher-paid employee, the combined statutory deduction under the 2013 Act would rise dramatically — from KES 400/month total (old scheme) to several thousand shillings per month — and the employer's cost per employee would increase in proportion.

The litigation: where things stand

The 2013 Act has been in and out of Kenyan courts since it was gazetted. The Employment and Labour Relations Court first suspended implementation in 2014. The Act was challenged again in 2023 when the NSSF Board attempted to operationalise the Tier II bands. In February 2023, the Court of Appeal upheld an earlier stay. As of the time of writing, the matter has continued through further appeals.

Practical position for 2025: Most Kenyan payroll practitioners and labour advisors recommend applying the old flat-rate contributions (KES 200 employer + KES 200 employee) until there is a final, unappealable court order directing the new rates. Applying Tier II rates while an appeal is pending exposes employers to employee disputes over over-deduction. Applying nothing exposes employers to NSSF non-compliance.

NSSF Tier II rates are subject to ongoing litigation. Check the latest Kenya Court of Appeal position before applying Tier II rates. If you are unsure of the current position, consult a Kenyan labour law practitioner or the Kenya Law Reform Commission portal for the current court status.

Remittance

NSSF contributions — whichever rate applies — are remitted via the NSSF portal or an approved payment agent by the 9th of the following month. Late remittance attracts a 5% penalty on the outstanding amount.

2. Affordable Housing Levy (AHL)

The Affordable Housing Levy was introduced under the Affordable Housing Act and took effect as a firm statutory deduction from the Finance Act 2023, after earlier court-ordered stays were resolved in March 2024.

The numbers:

AHL = 1.5% of gross pay (employee) + 1.5% of gross pay (employer), remitted monthly via KRA iTax.

Gross pay means all emoluments: basic salary, all allowances, overtime, bonuses, and commissions. The calculation base is the same as SHA — not the capped or tiered base that NSSF uses.

Allowable deduction: The employee-side AHL (1.5%) is deductible from taxable income before PAYE, reducing the employee's chargeable income. Payroll systems that miss this deduction silently over-withhold PAYE.

Remittance: Monthly, via KRA iTax, by the 9th of the following month — the same deadline as PAYE and SHA. The levy goes into a dedicated Affordable Housing Development Fund account, not the general KRA tax pool.

Registration: Employers who are already registered for PAYE on KRA iTax do not need a separate AHL registration — the AHL line is added to the existing PAYE return. However, if your company is not PAYE-registered (for example, because all employees are below the PAYE threshold), you still have an AHL obligation and must register via the KRA taxpayer portal (kra.go.ke).

Example: AHL on a KES 100,000/month payslip

Across a 30-person workforce averaging KES 120,000 gross, AHL costs the employer side KES 54,000/month — KES 648,000/year — that wasn't on any 2022 payslip.

3. SHA (Social Health Authority)

SHA replaced NHIF on 1 October 2024. The contribution rate is 2.75% of gross pay, with a minimum of KES 300/month and no upper cap. SHA is remitted monthly via the SHA portal, not KRA.

We cover SHA in detail — registration, rates, common mistakes, and the NHIF transition — in our companion article:

SHA replaces NHIF in Kenya: what employers must do in 2026

4. The combined statutory stack on a KES 100,000 payslip

Here is how the four statutory lines (NSSF at old flat rates, AHL, SHA, and PAYE) stack on a KES 100,000/month gross employee. PAYE is an approximation after statutory reliefs and allowable deductions; your exact PAYE will vary by personal relief, insurance, and declared rent under SHA rules.

The employer's cash cost for this employee is KES 100,000 gross + KES 1,700 statutory contributions = approximately KES 101,700/month before any voluntary pension or group health top-up.

If Tier II NSSF rates are eventually upheld and applied retroactively, the NSSF line increases significantly — which is exactly why the litigation outcome matters for payroll budgeting.

5. NITA — the levy most employers forget

Alongside the four main lines sits the National Industrial Training Authority (NITA) levy: KES 50 per employee per month, employer-side only, remitted annually to NITA. Small, but audited. For a 50-person payroll, that is KES 30,000/year — with a 50% penalty for late filing.

6. What employers must do

Registration checklist

Before running Kenyan payroll, confirm all four registrations are active:

1. KRA iTax (PAYE + AHL) — employer taxpayer registration via kra.go.ke
2. NSSF employer registration — via the NSSF portal
3. SHA employer registration — separate from NHIF; existing employers must have migrated their workforce registration via the SHA member portal
4. NITA registration — via the NITA portal; annual levy and return

Monthly compliance calendar

Penalties for non-compliance

• PAYE late remittance: 5% of tax due per month plus 1% interest per month (Kenya Revenue Authority Act)
• AHL late remittance: Standard KRA penalty framework applies (same as PAYE)
• SHA late remittance: 2% per month on the unpaid amount
• NSSF late remittance: 5% of the outstanding contribution
• NITA: 50% penalty on the annual levy amount

Sources

• NSSF Act 2013 — Kenya Law
• Kenya Revenue Authority — kra.go.ke
• Bridge Talent Group — Kenya statutory deductions 2025

AnooreHR's Kenya country pack treats NSSF, SHA, AHL, and NITA as profile-driven deductions. When the courts finally resolve the NSSF Tier II position, updating the pack is a JSON file change — no code deployment required. Both halves of AHL (employee + employer) post to the correct GL accounts automatically, and the SHA and AHL allowable-deduction rules reduce the PAYE base before withholding.

Kenya is on AnooreHR's 2026 country rollout, pending local accountant sign-off. To see the full statutory stack end-to-end, book a demo or sign up free to explore the platform.

Frequently asked questions

Related: SHA replaces NHIF in Kenya: what employers must do in 2026 · How AnooreHR handles payroll · See pricing