By Patrick Wekesa
The Social Health Insurance Fund, or SHIF, is the health contribution that came off every Kenyan payslip after it replaced the National Hospital Insurance Fund, NHIF, in October 2024. For employers it changed both how much is deducted and where it is paid. This guide explains what SHIF is, how the 2.75 percent rate is worked out, how it differs from the old NHIF, who has to register, and what you must file each month. You can check the figure for any salary with our free SHIF calculator as you go.
What SHIF Is
SHIF is the contributory health fund created under the Social Health Insurance Act 2023. It is administered by the Social Health Authority, the SHA, which took over from NHIF. Its purpose is to fund access to health services for contributors and their declared dependants. Every employee in Kenya contributes to SHIF, and every other resident is expected to register as a household. Unlike NSSF, SHIF is an employee-only deduction: the employer withholds it from the salary and remits it, but there is no separate employer contribution on top.
How SHIF Is Calculated: The 2.75 Percent Rate
SHIF is a flat 2.75 percent of gross monthly salary, with a minimum contribution of KES 300 a month. There is no upper cap, which means higher earners contribute proportionally more. This is the single biggest difference from NHIF and it is worth understanding clearly.
| Gross salary | SHIF at 2.75% |
|---|---|
| KES 20,000 | KES 550 |
| KES 50,000 | KES 1,375 |
| KES 100,000 | KES 2,750 |
| KES 200,000 | KES 5,500 |
Because the minimum is KES 300, any employee earning below about KES 10,909 a month still contributes KES 300 rather than a lower percentage figure. Above that, the contribution simply follows the 2.75 percent line with no ceiling.
SHIF Versus NHIF: What Changed
NHIF used a banded flat-rate table, where contributions ranged from KES 150 to KES 1,700 a month depending on which salary band you fell into. The top band capped at KES 1,700 no matter how much you earned. SHIF removed the bands entirely and replaced them with a straight percentage. The practical effects are worth spelling out:
- Higher earners pay more. Under NHIF a KES 300,000 salary contributed KES 1,700. Under SHIF the same salary contributes KES 8,250. There is no cap.
- Lower earners are broadly similar. The KES 300 minimum keeps the lowest contributions close to the old floor.
- Remittances now go to the SHA, not NHIF. Employer accounts were migrated at the transition, but the receiving body and portal changed.
- Registration is on the SHA system. All contributors were required to register afresh on the SHA platform.
Registration: Employers and Employees
Employers must be registered with the SHA and must ensure every employee is registered as a member. New employees should be enrolled before their first payroll run so the deduction can be remitted correctly. Employees register their own details and declare dependants through the SHA system. For a foreign company setting up in Kenya, SHA registration is one of the statutory steps our business set-up service completes alongside KRA and NSSF enrolment, and it is handled automatically when staff are engaged through our employer of record service.
Is SHIF Tax Deductible?
Yes. Since December 2024, SHIF contributions are deductible from taxable income before PAYE is calculated. That softens the net cost for the employee, because the 2.75 percent reduces the pay on which income tax is charged. This treatment is applied automatically in our net salary calculator and our PAYE calculator, so you can see the combined effect on take-home pay.
Deadlines and Penalties
SHIF is due by the 9th of the month following the payroll, in line with PAYE, NSSF, and the Housing Levy. The employer deducts the amount, files the return on the SHA portal, and remits the money. Failing to deduct or remit SHIF is a compliance breach that can attract penalties and interest, and it also puts employees at risk of losing access to health cover, which creates a direct staff-relations problem on top of the regulatory one. Employers who want this handled without risk use our managed payroll service, which has filed statutory returns on time for every client since 2011.
What SHIF Covers
SHIF funds access to a defined package of health services for registered members and their dependants, delivered through contracted public and private facilities. The scheme sits alongside two related funds created under the same reform, one for primary health care and one for emergency, chronic, and critical illness. For employers the day-to-day obligation is simply accurate monthly contribution and registration. The benefit design is administered by the SHA rather than by the employer.
Common SHIF Mistakes Employers Make
A handful of errors come up again and again when employers manage SHIF in-house. The most common is still applying the old NHIF flat bands, which under-deducts for anyone on a higher salary and builds up an arrears position the SHA can recover later. Another is forgetting the KES 300 minimum for very low earners. A third is missing new joiners because they were not registered on the SHA system before their first payslip, which delays their cover. A fourth is treating SHIF as an employer cost and matching it the way NSSF is matched, when SHIF is deducted from the employee only. Catching these early is exactly what a payroll audit is for, and it is one of the main reasons employers move the monthly cycle to a specialist.
How SHIF Fits With NSSF, Housing Levy, and PAYE
SHIF is one of the standard deductions an employer manages each month. It sits next to NSSF pension contributions, the Affordable Housing Levy at 1.5 percent from each side, and PAYE income tax. To see how they combine on a real salary, run the figures through our net salary calculator, and for the complete monthly obligation read our Kenya payroll compliance guide.
Staying Compliant
SHIF compliance comes down to registering every employee, applying 2.75 percent with the KES 300 floor, filing on the SHA portal, and remitting by the 9th. For companies with a Kenyan entity, our payroll processing service manages this end to end, and a payroll audit can confirm historical periods are clean. For international companies without a local entity, our employer of record service carries SHIF and every other statutory obligation under our own registration.
