- For a Sh100,000 gross salary, the final PAYE after relief was Sh21,097.85
- Total deductions amounted to Sh27,507.85 and the net pay was Sh72,492.15
- Introduction of Social Health Insurance Fund (SHIF) brought new and adjusted deductions in October 2024
October brought some notable changes to Kenyan payslips, with the recent introduction of the Social Health Insurance Fund, October payslips for employees took on a different look.
Here’s a detailed breakdown of how these deductions affect what employees actually take home, offering a clear picture of the impact on October’s net salary.
Working with a Sh100,000 gross salary figure, here is what the deductions and take home looked like.
Breakdown of deductions
1. Gross Salary: Sh100,000
This represents the total salary before any deductions are applied.
2. PAYE [Pay As You Earn]
PAYE is calculated progressively and adjusted by allowable deductions and tax reliefs:
Final PAYE after relief for someone earning Sh100,00 is Sh21,097.85
3. Social Health Insurance Fund Deduction
Following the enactment of the new Social Health Insurance Fund, 2.75% of the gross salary is deducted:
- Deduction = 100,000 x 0.0275 = Sh2,750
READ: How your February salary will look like after NSSF increases rates for 2024
4. Housing levy
The Housing Levy is calculated at 1.5% of the gross salary:
- Deduction = 100,000 x 0.015 = Sh1,500
5. National Social Security Fund [NSSF]
- Lower limit (Tier 1)
This tier applies to a lower contribution amount limit of Sh7,000. Both the employee and the employer contribute Sh420 each.
The total monthly contribution for Tier 1 is Sh840.
- Upper limit (Tier 2)
This tier applies to a higher contribution amount limit of Sh36,000. Contributions are calculated on the amount between the lower limit [Sh7,000] and the upper limit [Sh36,000], giving a base of Sh29,000.
Both the employee and the employer contribute Sh1,740 each.
- Tier I: Sh420
- Tier II: Sh1,740
- Total NSSF Deduction: Sh2,160
Total deductions Sh27,507.85 while the total net pay is Sh72,492.15.
| Deduction Type | Amount (Sh) |
|---|---|
| PAYE | 21,097.85 |
| NSSF (Tier I & II) | 2,160.00 |
| SHIF | 2,750.00 |
| Housing Levy | 1,500.00 |
| Total Deductions | 27,507.85 |
What the increased deductions mean for employees
With the increased deductions under SHIF, NSSF, and the Housing Levy, employees now see a more substantial portion of their salaries redirected towards mandatory contributions.
This change affects not only monthly budgeting but also longer-term financial planning.
1. Reduced disposable income
The higher deductions reduce take-home pay, leaving employees with less disposable income for daily expenses, savings, and discretionary spending.
Those previously saving or investing part of their salary may now find it harder to maintain these habits without adjusting their budgets.
2. Greater emphasis on financial planning
As take-home pay shrinks, employees may need to reconsider their spending priorities and tighten budgets.
This means employees maybe forced to track expenses closely, prioritising essentials and exploring alternative savings or investment options.
3. Impacts on lifestyle choices
With less net income, some employees might need to adjust lifestyle choices such as dining out, entertainment, and other non-essential expenditures.
The cost of living has risen in recent years, so the decrease in take-home pay could heighten financial pressure on households already balancing rising costs for essentials.