How Kenyans’ Payslips Will Look Like With New NSSF Deduction Rates: Breakdown Based on Salary Range
In February, salaried workers will experience a decrease in take-home pay as a result of the National Social Security Fund (NSSF) implementing new rates.
The mandatory pension deductions for the February 2024 payroll have been raised by NSSF, requiring Kenyans to make contributions ranging from Ksh420 to Ksh1,740.
These changes will significantly impact workers’ take-home pay, adding to the financial challenges they already face due to the tough economy.
ALSO READ: NSSF Deductions to Skyrocket In February: New Rates
Over the past year, various government measures, such as the Finance Act 2023, introduced mandatory deductions like the Housing Levy and new tax brackets for Pay as You Earn (PAYE), reducing the portion of workers’ payslips. To illustrate, consider the following model payslip:
Sample Payslip
| Component | Amount (in Ksh) |
|---|---|
| Gross Pay | 20,000 |
| Contribution | |
| – NSSF | 1,740 |
| – Taxable Income | 18,800 |
| – Tax Before Relief | 0 |
| – Personal Relief | 0 |
| – Insurance Relief | 0 |
| – PAYE | 0 |
| – NHIF | 750 |
| – Housing Levy | 600 |
| Net Pay | 17,750 |
Note:
- NSSF contributions increased due to revised rates (1,740).
- The taxable income is adjusted based on the deductions.
- No tax before relief, personal relief, or insurance relief is applicable.
- PAYE is not applicable, resulting in a tax-free income.
- NHIF deductions remain constant at 750.
- Housing Levy deduction is 600.
- The resulting Net Pay is 17,750.
ALSO READ: NSSF Benefits for Kenyan Teachers; Requirements and Application Process
Efforts to resist the collection of the Housing Levy were thwarted in court, allowing the government to continue collecting until January 26, 2024. Since July 1, 2023, 1.5% of Kenyans’ gross pay has been deducted for the Affordable Housing program, with employers matching the deduction.
Consequently, the February pay slip will show a considerable reduction as the government aims to boost revenue collection, targeting over a trillion in subsequent financial years.
NSSF Rates
As per the NSSF Act, the new rates are determined by a worker’s salary scale, divided into Upper Earning Limit (UEL) for those earning Ksh18,000 and above, and Lower Earning Limit (LEL) for those below Ksh18,000.
Contributions for Tier 1 (lower limit) will now be based on the revised Ksh7,000, resulting in employees contributing Ksh420 instead of the previous Ksh360.
ALSO READ: KNUT Addresses NSSF Deductions on Teachers Payslips and Unfulfilled Pay Increments
Meanwhile, those in the Upper limit will contribute Ksh1,740, up from Ksh1,080. Employers will match these contributions, leading to a total increase from Ksh2,160 to Ksh4,320, effective February 9, 2024.
Impact on Payslips
In addition to the 1.5% Housing Levy, the expanded PAYE introduces two new tax brackets – 35% for those earning above Ksh800,000 and 32.5% for those earning between Ksh500,000 and Ksh800,000.
For instance, a worker earning Ksh600,000 will remit Ksh195,000, while someone earning Ksh1 million will be taxed Ksh350,000.
However, for the majority of Kenyans with an average monthly salary of Ksh20,000, the net pay on the payslip will be Ksh17,750.
ALSO READ: TSC Introduces NSSF Flat Rate Deductions for Teachers’ Salaries
