Our guide to Payroll in Kenya
On the western shores of the Indian Ocean, and sharing land borders with Somalia, Ethiopia, South Sudan, Uganda, and Tanzania, Kenya has become one of East Africa’s most prominent economies, with a GDP of $113.42 billion in 2022.
Our latest insights into Kenya’s labour laws, offers up-to-date information on international payroll, & key updates on East African legislative changes.
1. Introduction to Our guide to Payroll in Kenya
2. Setting Up a Business
3. Employment Practices
4. Taxation & Social Security
5. Payroll Operations
6. Hiring & Termination
7. Compensation & Benefits
8. Visas & Work Permits
9. Location-Specific Considerations
1. Introduction to Our guide to Payroll in Kenya
Doing Business in Kenya
Kenya offers a strategic entry point into East Africa with strong infrastructure and a business-friendly environment. Key sectors include agriculture, telecom, fintech, energy, and logistics. Government reforms have improved the ease of doing business.
Basic Facts about Kenya
| Full Name | Republic of Kenya |
| Population | 49.7 million (2017) |
| Capital | Nairobi |
| Major Language(s) | Swahili, English |
| Major Religion(s) | Christianity, Islam |
| Monetary Unit | Kenyan Shilling (KES) |
| Main Exports | Tea, coffee, horticultural products, apparel |
| Internet Domain | .ke |
| International Dialing Code | +254 |
Common Phrases
Hello: Jambo / Hujambo
Good Morning: Habari ya asubuhi
Good Evening: Habari ya jioni
Do you speak English?: Unaongea Kiingereza?
Goodbye: Kwaheri
Thank you: Asante
See you later: Tutaonana baadaye
2. Setting Up a Business
Registrations and Establishing an Entity
To operate legally in Kenya, businesses must register with:
- Companies Registry via the eCitizen portal
- Kenya Revenue Authority (KRA) for a Personal Identification Number (PIN)
- Local county government for a Business Permit
- National Social Security Fund (NSSF) and Social Health Authority (SHA)
- Open a local bank account
Banking
A Kenyan bank account is recommended for third-party payments.
Banking Hours: Monday to Friday, 09:00 to 15:00. Some branches open on Saturdays.
3. Employment Practices
Working Week
Standard working hours are 40–45 hours per week, typically Monday to Friday, 09:00–17:00. Saturday work may apply in certain sectors.
Employment Law
Regulated by the Employment Act 2007 and supported by collective agreements.
Holiday Entitlement
Minimum of 21 paid working days per year after 12 months of continuous service.
Maternity Leave
3 months with full pay.
Paternity Leave
2 weeks with full pay.
Sick Leave
14 days per year (7 days full pay, 7 days half-pay), subject to medical certification.
Public Holidays
Kenya observes national and religious public holidays.
National Service
No mandatory service.
4. Taxation & Social Security
Tax Year: January 1 – December 31
Income Tax (PAYE)
Progressive rates:
- Up to KES 288,000: 10%
- KES 288,001–388,000: 25%
- KES 388,001–6,000,000: 30%
- KES 6,000,001–9,600,000: 32.5%
- Over KES 9,600,000: 35%
Tax Relief: KES 2,400/month personal relief
Social Security Contributions
- NSSF: 6% of gross income (up to KES 2,160), shared equally between employer and employee
- SHA: 2.75% of gross salary (employee only)
- NITA: KES 50/month per employee (employer only)
5. Payroll Operations
Payroll
- Salaries are paid monthly
- Online payslips are allowed
- Employers must retain payroll records for 7–10 years
Reports
Monthly: PAYE, NSSF, SHA, and NITA remittances due by the 9th of the following monthAnnual: Tax returns submitted by June 30
6. Hiring & Termination
New Employees
Register employees with KRA, NSSF, SHA
Obtain PIN, NSSF, and SHA numbers
Leavers
Termination must follow due process (notice, hearing)
Final dues must include accrued leave, notice pay, pension contributions
7. Compensation & Benefits
Employee Benefits
Statutory pension and health coverage
Common perks: meal allowance, transport, airtime/data
Expenses
Must be supported by receipts
Car benefits taxed at 2% of the vehicle’s value
8. Visas & Work Permits
Work Permits
There are various classes for such permits, depending on the motive for coming to Kenya. These are detailed below;
Class D: This is issued to a person who is offered specific employment by a specific employer who is qualified to undertake that employment.
Class I: Work/Residence permit issued to a member of missionary society approved by the Government of Kenya and whose presence is beneficial to the country.
Class B: Work permit issued to a person wishing to invest in Agriculture and Animal Husbandry
Class A: Issued to a person who intends to engage in prospecting for Minerals or Mining
Class G: Work permit issued to investors in specific Trade, Business or Consultancy
Class K: Residence Permit issued to a person who has an assured income derived from sources outside and undertakes not to accept paid employment of any kind
Class M: Work Permit issued to Conventional Refugees.
Required for foreign nationals. Common classes:
- Class D: Employment
- Class G: Investment/Consultancy
- Class I: Missionary work
Applications are made through the Department of Immigration and are usually valid for 1–2 years.
Visa on Arrival
Available in special cases but not suitable for employment purposes.
9. Location-Specific Considerations
- KRA requires e-filing via the iTax system
- Employee data must be validated before tax filings
- Regional cost-of-living and salary differences may apply
- SHA-led social security reform is ongoing
Further Information
For more information, or assistance with Kenya tax enquiries, please contact: gi@activpayroll.com
About This Payroll and Tax Overview
This document offers general guidance and should not be considered a definitive or comprehensive account of legal, regulatory, or tax obligations. Always consult a professional for specific advice. activpayroll accepts no liability for reliance on its contents.
Talk to a specialist today and find out how we support the growth of over 500 businesses with a range of activpayroll solutions designed to help your global payroll and people operations succeed.