Is the SHIF contribution a taxable benefit?

No, the SHIF contribution is not a benefit. It is a mandatory statutory deduction taken from the employee's gross salary before Pay As You Earn (PAYE) taxes are calculated. This means it reduces the employee's taxable income.

Does the employer also contribute 2.75% for SHIF?

No. Unlike NSSF contributions, there is no matching employer contribution for SHIF. The employer's only responsibility is to accurately deduct the 2.75% from the employee's gross pay and remit it to the Social Health Authority.

What is the official deadline for remitting SHIF payments?

The deadline for SHIF remittance is on or before the 9th day of the month following the one in which the salary was earned. This deadline is harmonised with those for PAYE and the Affordable Housing Levy.

What happens if an employee's 2.75% contribution is less than KSh 300?

The Social Health Insurance Act specifies a minimum monthly contribution of KSh 300. If 2.75% of an employee's gross salary calculates to an amount less than KSh 300, you must deduct and remit the minimum KSh 300.

Do expatriate employees working in Kenya have to contribute to SHIF?

Yes, the Act applies to every resident in Kenya, which includes expatriate employees on work permits. All employees, regardless of nationality, are required to be registered and contribute to SHIF unless a specific exemption exists under an international or bilateral agreement.

How does SHIF affect our company's private medical insurance scheme?

SHIF is a mandatory social insurance programme for all employees. Private medical insurance is supplementary. Companies can continue to offer private insurance as an additional benefit to top up the coverage provided by SHIF, cover services not included in the standard package, or provide access to a wider network of facilities.

SHIF Rates for Employers in Kenya: A 2026 Guide

The transition from the National Hospital Insurance Fund (NHIF) to the Social Health Insurance Fund (SHIF) marks a significant shift in Kenya's healthcare contribution system. For employers, understanding your new obligations under this framework is critical for accurate payroll management and legal compliance. This guide provides a direct breakdown of the SHIF rates for employers in Kenya for 2026, detailing the calculation, remittance process, and key differences from the former NHIF system.

The fundamental change introduced by the Social Health Insurance Act, 2023, is the move from a tiered, flat-rate contribution to a percentage of an employee's gross salary. Every employer must deduct and remit these contributions on behalf of their staff.

SHIF Rates and Calculation for Employers in Kenya (2026)

The new system simplifies the calculation method but has major financial implications for employees, particularly those with higher incomes. Employers must ensure their payroll systems are configured correctly to manage these changes and avoid compliance issues.

The Employee Contribution Rate: 2.75% of Gross Salary

The mandatory SHIF contribution for every employee is 2.75% of their gross monthly salary. This is a statutory deduction that the employer must withhold from the employee's pay before calculating other deductions like Pay As You Earn (PAYE).

For the purpose of SHIF, 'gross monthly salary' includes the basic salary and all regular cash payments, such as house allowance. It does not include non-cash benefits or reimbursements like travel per diems.

Key points for payroll calculation:

The Rate: 2.75% of gross monthly earnings.
Minimum Contribution: There is a mandatory floor of KSh 300 per month. If 2.75% of an employee's salary is less than this amount, the employer must still deduct and remit KSh 300.
No Upper Cap: Unlike the old NHIF system which capped contributions at KSh 1,700, SHIF has no upper limit. The 2.75% rate applies to the entire gross salary, regardless of the amount.

Consider these examples:

An employee earning a gross salary of KSh 50,000 will contribute: 0.0275 x 50,000 = KSh 1,375.
A manager with a gross salary of KSh 300,000 will contribute: 0.0275 x 300,000 = KSh 8,250.
An intern paid a stipend of KSh 10,000 will contribute the minimum of KSh 300, because 2.75% of their pay (KSh 275) is below the required floor.

The Employer's Role: Deduction and Remittance

A common point of confusion is whether employers must make a matching contribution for SHIF. The answer is no. Under the Act, the employer’s legal responsibility is solely to deduct the 2.75% from the employee’s salary and remit the full amount to the Social Health Authority (SHA).

This is different from the National Social Security Fund (NSSF), where the employer is required to match the employee's contribution. For SHIF, the entire financial contribution is made by the employee, with the employer acting as the collection agent for the government.

How to Remit SHIF Contributions

Timely and accurate remittance is essential for avoiding penalties. The process is now integrated with other key statutory payroll deductions.

Registration with the Social Health Authority (SHA)

Most employers who were registered with the old NHIF have been automatically transitioned to the new SHIF system. New organisations must register with the SHA to obtain an employer code. It is also the employer's responsibility to ensure that all employees are registered individually with SHIF to access health services. You can find official registration information on the Social Health Authority website.

Remittance Deadline and Process

SHIF contributions must be remitted on or before the 9th day of the following month. This deadline is unified with the remittance dates for PAYE, the Affordable Housing Levy (AHL), and NSSF contributions, creating a single monthly deadline for all major payroll taxes.

The standard remittance process is as follows:

Calculate the correct SHIF deduction for each employee (2.75% of gross pay, with a KSh 300 minimum).
Consolidate this data into a unified payroll return, often called a by-product file, which includes details for SHIF, PAYE, AHL, and NSSF.
Upload this return to the KRA iTax portal.
Generate a single payment slip for the total amount due for all statutory deductions.
Make the payment via an approved bank or mobile money channel before the 9th.

Accuracy is critical. Minor errors in calculation can lead to incorrect filings and penalties. For organisations seeking to guarantee full compliance and streamline operations, our payroll processing services manage all statutory calculations and remittances on your behalf.

Penalties for SHIF Non-Compliance

The Social Health Insurance Act, 2023, is strict. Employers who fail to deduct contributions or fail to remit the collected funds on time face significant penalties. A penalty of 2% of the total contribution amount due is charged for each month the payment is late. This penalty compounds monthly, so delays can become extremely expensive. The SHA is also empowered to take legal action to recover all unpaid contributions and associated penalties.

SHIF vs. NHIF: Key Changes for Employers

This table summarises the most important differences from an employer's viewpoint:

Contribution Model: NHIF used a graduated fixed-amount scale (from KSh 150 to KSh 1,700). SHIF uses a flat percentage (2.75% of gross salary).
Contribution Cap: NHIF had a maximum contribution of KSh 1,700 per month. SHIF has no maximum cap, which substantially increases the contribution for high-income earners.
Minimum Contribution: NHIF's lowest contribution was KSh 150. SHIF's minimum is KSh 300.
Unified Deadline: The SHIF remittance is part of the unified 9th-of-the-month deadline, simplifying the compliance calendar. You can read more about this in our guide to Kenya payroll compliance in 2026.

Ensuring Your Organisation Remains Compliant

Managing Kenya's dynamic employment and tax laws requires constant vigilance. The introduction of SHIF, alongside recent changes to NSSF and the Affordable Housing Levy, has added complexity to payroll administration.

For international companies, NGOs, and growing businesses that need to hire in Kenya without the burden of setting up a local entity and managing complex payroll, our Employer of Record (EOR) services provide a comprehensive solution. We act as the legal employer, handling employment contracts, payroll, statutory deductions, and all HR compliance, allowing you to focus on your strategic goals.