How Kenyans’ Payslips Will Look Like After New NSSF Rates Take Effect
In February, salaried employees will see a decrease in their take-home pay as a result of the National Social Security Fund (NSSF) implementing new rates.
The NSSF has raised the compulsory pension deductions for the February 2024 payroll, requiring Kenyan workers to contribute amounts ranging from Ksh420 to Ksh1,740.
These increased rates will have a notable impact on the net income of workers, particularly affecting those facing challenging economic conditions in the future.
It’s worth noting that over the past year, the government has already deducted a substantial portion from workers’ paychecks due to the implementation of the Finance Act 2023.
This Act introduced various measures, such as the mandatory Housing Levy and the introduction of new tax brackets for the Pay as You Earn (PAYE), among other changes.
Efforts to halt the collection of the Housing Levy faced a setback in court, as the Court of Appeal granted permission for the government to continue collecting the levy until January 26, 2024, when the final decision will be rendered.
Since July 1, 2023, the government has been deducting 1.5 percent from the gross pay of Kenyans for the Affordable Housing program, with employers matching the deduction.
This arrangement remains in effect until the court reaches a definitive verdict later this month.
The confluence of these factors will result in a notable reduction in Kenyans’ February pay slips, as the government aims to enhance revenue collection to surpass a trillion in the upcoming financial years.
NSSF Rates
As per the NSSF Act, the recently implemented rates are determined by a worker’s salary scale, bifurcated into the Upper Earning Limit (UEL) for individuals earning Ksh18,000 and above, and the Lower Earning Limit (LEL) for those earning below Ksh18,000.
Contributions for employees falling within the lower limit (Tier 1 category) will now be calculated based on the revised lower limit of Ksh7,000, an increase from the previous Ksh6,000. Consequently, employees in this category will now contribute Ksh420, compared to the prior amount of Ksh360.
Conversely, for employees in the Upper limit, the calculation will be based on the adjusted limit of Ksh36,000.
This means that workers in this category will now contribute Ksh1,740, a notable increase from the previous amount of Ksh1,080. Importantly, employers will match these contributions in both cases.
Starting from February 9, 2024, the total contributions, combining both employee and employer contributions, will see a rise from the existing Ksh2,160 to Ksh4,320.
How the Payslips Will be Affected
In addition to the 1.5 percent Housing Levy, the government has implemented an expanded Pay As You Earn (PAYE) structure, introducing two new tax brackets.
Employees earning above Ksh800,000 monthly face a 35 percent PAYE, while those earning between Ksh500,000 and Ksh800,000 are subject to a 32.5 percent rate.
To illustrate, a worker with a gross pay of Ksh600,000 will be taxed Ksh195,000, while another earning Ksh1 million will face a tax of Ksh350,000.
However, for the majority of Kenyans, with average earnings around Ksh20,000 according to Kenya National Bureau of Statistics (KNBS) data, a worker in this bracket will receive a net pay of Ksh17,750 after tax deductions.
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How Kenyans’ Payslips Will Look Like After New NSSF Rates Take Effect
