Payroll in Kenya

What does the payroll process in Kenya involve? 

The payroll process in Kenya is similar to the workflow you’re probably already used to. That said, there might be some pretty significant differences around Kenyan payroll laws, tax percentages, and working hours, which we’ll discuss later in this guide. 

To bring Kenyan workers on your payroll, you’ll need to:

• Collect the new hire’s information: When you hire a new worker, whether they are a contractor or an employee, you have to collect the necessary information. Employers must withhold income, national hospital fund, national social security fund, and national housing development fund taxes for each worker. 
• Calculate gross pay: Gross pay is the amount of pay owed to your employees and contractors in Kenya without any deductions taken out yet. This is calculated by hours worked and rate of pay. 
• Calculate net pay: Net pay is the worker’s gross pay with taxes and benefits taken out. This is the amount you must pay your employees and contractors. 
• Pay your worker: You must follow Kenya payroll laws to pay workers on time each month. Your business must keep accurate payroll records, too. 
• Submit taxes and deductions to the proper agencies: Employers are responsible for submitting the taxes taken out to the proper authorities. There are four regulatory agencies in Kenya to report to. 

The steps appear quite straightforward when listed on paper, but there’s a range of nuances and laws employers must follow to do business legally in Kenya.

Did you know employers have to submit income taxes to the Kenya Income Authority monthly? Or that employers have to submit contributions on behalf of employees and the business to the National Social Security Fund no later than the 15th of the following month? 

Taking the time needed to learn employment and labor laws in Kenya will be a costly process. If you partner with Skuad, you can alleviate the pressure and stress by letting us handle the payroll process while remaining 100% compliant with Kenya laws.  

‍Do you want to learn more about Skuad’s payroll services in Kenya? Get in touch with the team today.

What do you need to know about payroll in Kenya? 

There are several things employers must understand before processing payroll in Kenya. There are laws and expectations around the following:

• Minimum wage
• Overtime
• Working hours
• Payroll cycles
• Leave entitlement
• Severance pay.

We’ll discuss each of these in further detail below. 

Kenya payroll basics 

The currency in Kenya is the Kenyan Shilling (KES). 1 KES is the equivalent of .0087 USD — or to flip that so it’s easier to get your head around, 1 USD = ~115 KES. Kenyan employees are paid in a monthly payroll cycle with payments on the last day of the month. Casual workers are expected to be paid daily. 

Working hours in Kenya 

Kenya has a few different rules about working hours. While the standard workweek has 52 hours, most companies cap it at 45. For daytime employees, the maximum amount of work for two weeks is 116 hours.

Employees who work night shifts are limited to 60 hours weekly. And the maximum for two weeks is 144 hours.

Kenya does have collective bargaining agreements in some sectors that could impact the working hours. 

Overtime rules in Kenya 

Overtime is paid at 150% of hourly rates unless it is otherwise noted in the employment contract. If an employer asks a worker to work overtime on a public holiday or weekend, 200% of regular pay rates are expected. 

Minimum wage requirements in Kenya 

The minimum wage in Kenya varies based on the industry and the geographic location. The range is typically between 13,572.90 KES and 30,627.45 KES.

It’s important to understand the minimum wage requirements for your specific business. There are serious consequences for companies that pay below the minimum wage.

Speak to one of the Skuad team and we’ll clear up any confusion.

Employment leave entitlement in Kenya 

Annual leave

Employees in Kenya are entitled to a minimum of 21 paid days off after one year of employment. Kenya also observes 13 paid public holidays:

• New Year's Day Sat, 1 Jan 2022
• Good Friday Fri, 15 Apr 2022
• Easter Monday Mon, 18 Apr 2022
• Labour Day Mon, 2 May 2022
• Eid al-Fitr 2–3 May 2022 (tbc)
• Madaraka Day Wed, 1 Jun 2022
• Eid al-Adha 9–10 Jul 2022 (tbc)
• Huduma Day Mon, 10 Oct 2022
• Mashujaa Day Thu, 20 Oct 2022
• Jamhuri Day Mon, 12 Dec 2022
• Christmas Day Mon, 26 Dec 2022
• Utamaduni Day Mon, 26 Dec 2022

Once a worker has been with an employer for two months, they are entitled to 7 days of 100% paid sick leave. They can also take an additional 7 days at 50% of the normal pay rate. 

Maternity and paternity leave

Maternity leave for pregnant employees is three months of 100% pay. Workers must give a one-week notice before taking it. In the case of adoption, workers are also entitled to three months of 100% pay. In these situations, the worker must provide a two-week notice.

Paternal leave for birth or adoption is two weeks of paid leave. Parents preparing to adopt a child can receive a full month of paid leave with the proper documentation and notice. 

Severance pay in Kenya 

Severance pay is only required in Kenya in the case of redundancy. For those workers, employers are required to pay 15 days of severance pay for every year of employment.

Kenya payroll taxes and deductions 

Four authorities govern payroll in Kenya. Employers are expected to make contributions and take out taxes on workers.

The authorities are as follows: 

• Kenya Revenue Authority (KRA)
• National Social Security Fund (NSSF)
• National Hospital Insurance Fund (NHIF)
• Directorate of Industrial Training (DITA)

Employer contributions include:

• 5% NSSF contribution with a maximum of 200 KES monthly 
• 1.5% toward the National Housing Development Fund 
• 50 KES per employee

Employee contributions include:

• 5% toward the NSSF
• 1.5% toward the National Housing Development Fund 
• 150 to 1,700 KES for the NHIF for employees making more than 100,000 KES monthly
• 10-30% income tax

Income tax brackets are as follows:

• 10% for employees making up to 24,000 KES monthly 
• 20% for employees making up to 32,333 KES monthly 
• 30% for employees making more than 32,333 KES monthly

It’s crucial to take out the correct amount of taxes and pay them to the proper authorities on time. Connect with Skuad today to let us help you with your payroll in Kenya.

Payroll compliance in Kenya

As an employer, you must understand and follow the rules listed above. Failing to do so can result in penalties and fines with Kenyan authorities.

The Kenya Revenue Authority’s website lists several penalties for late filings, failure to file, and failure to take deductions. Offenses vary in penalty amounts but tend to be between 5-10% of the amount due. 

Don’t risk making a bad impression with regulatory authorities in Kenya! You can easily avoid the penalties and additional consequences by partnering with a payroll service provider. Speak to a Skuad representative today to learn more about the expectations of your business when paying Kenyan workers.

Payroll providers in Kenya: How to start building your team

There are a lot of risks and expenses associated with handling global payroll on your own. Not only will your business have to establish an entity in Kenya, but you’ll have to manage all related operations.

Businesses would have to find a legal professional based in Kenya to ensure all processes were compliant with relevant laws. They’d also have to remain updated with regulatory changes.

Managing confidential employee records can be intense when hiring globally. Businesses can save time and costs by working with a payroll service provider. A payroll service provider maintains confidential documents, ensures 100% compliance in all activities, and verifies salaries to meet local requirements.

Outsourcing a payroll service benefits the company in many ways. They have a partner available to help them scale their business while also reducing the stresses around legalities in another country. SMEs and startups can quickly scale operations with an outsourced provider.

Plus, you get access to benefits and systems that may not be available to a smaller business otherwise. 

Benefits of partnering with Skuad for payroll in Kenya

Skuad can help you pay contractors and employees in Kenya with an easy-to-use platform. Our system has extensive cybersecurity measures in place, so you can house employee information and employment contracts with no worries about confidentiality maintenance.

We offer a low-cost package to manage Kenyan payroll, benefits, and compliance for $199 per employee, per month. You’ll get a dedicated account manager to walk you through our platform so you can quickly learn how to approve time off, offer competitive benefits packages, and review local employment contracts written by Kenyan legal experts.

Are you ready to start hiring in Kenya?

Contact Skuad today to learn more about how we can help you scale globally. And book a free demo so you can see how easy our platform is for yourself.