Payroll Services in Kenya —
Precise, Compliant,
and Fully Managed.
Two Max Group delivers fully managed payroll services in Kenya for foreign-owned subsidiaries, multinationals, NGOs, and high-growth businesses — handling every statutory obligation from KRA PAYE computation and monthly iTax filing to NSSF, SHIF, and the Affordable Housing Levy. One partner. Full compliance. Zero penalties across every client account.
Every payroll run is computed against the current KRA PAYE bands, SHIF at 2.75%, NSSF tiered contributions, and the 1.5% Affordable Housing Levy — with iTax P10 returns filed before the 9th of every month without exception.
Fund your Kenyan payroll in USD, GBP, EUR, or any major currency. Two Max Group handles KES conversion, local bank disbursement, and produces consolidated payroll reports formatted for group treasury and international audit requirements.
A missed KRA filing deadline attracts a 5% penalty plus 1% monthly compounding interest on the outstanding balance. Our managed payroll calendar has a zero late-filing record across all client accounts — protecting your entity from enforcement action at every cycle.
What payroll services in Kenya actually require
Most organisations operating in Kenya significantly underestimate the scope of payroll compliance. Two Max Group manages every statutory, financial, and regulatory obligation under one fully managed engagement.
What is payroll processing in Kenya?
Payroll processing in Kenya is the end-to-end cycle of computing employee remuneration, applying all statutory deductions, disbursing net salaries, and remitting contributions to the Kenya Revenue Authority (KRA), the National Social Security Fund (NSSF), the Social Health Insurance Fund (SHIF), and the Affordable Housing Levy — within strict monthly deadlines set by Kenyan law.
Under the Employment Act, Cap 226, every employer — including foreign-owned subsidiaries registered under the Companies Act, 2015 — must operate a fully compliant payroll from the first day any employee is engaged. Failure to remit deductions by the statutory deadlines attracts KRA penalties of 5% of the outstanding balance plus 1% compounding monthly interest, regardless of whether the delay was intentional.
- ✓PAYE computation against the five KRA progressive tax bands — P10 return filed on iTax by the 9th of each month
- ✓NSSF Tier I and Tier II contributions — employer and employee shares under the NSSF Act, 2013
- ✓SHIF at 2.75% of gross salary — remitted to the Social Health Authority, fully tax-deductible from December 2024
- ✓Affordable Housing Levy at 1.5% employer-matched — reintroduced under the Affordable Housing Act, 2024
- ✓Itemised payslips per Employment Act requirements — issued to every employee every pay cycle
- ✓Full 5-year payroll records retention for KRA audit purposes — accessible at any time
Who needs managed payroll services in Kenya?
Any organisation employing staff in Kenya carries the same statutory payroll obligations under Kenyan law — from a foreign director drawing a single salary to a regional HQ with 400 employees across multiple counties. The complexity increases significantly for foreign employers, NGOs with multi-funder reporting requirements, and businesses scaling headcount rapidly.
Foreign-owned companies incorporated through our Company Registration service typically need payroll operational within days of incorporation — before any in-house HR function is in place. Two Max Group can have your payroll fully live within 48 hours of engagement. If you are not yet incorporated, our Employer of Record (EOR) service deploys your Kenya team immediately, with payroll fully managed throughout.
- ✓Foreign-owned subsidiaries needing compliant payroll from day one of Kenya operations
- ✓Multinationals and regional HQs requiring multi-currency payroll and group-level reporting
- ✓International NGOs and development organisations with donor compliance and audit requirements
- ✓SMEs and startups that cannot justify a full in-house payroll and HR department
- ✓EOR clients requiring payroll managed alongside legal employment — one integrated service
Why leading organisations outsource payroll services in Kenya to Two Max Group
Managing payroll in-house in Kenya carries compounding statutory risk — annual Finance Act amendments, KRA audit exposure, and multi-agency remittance deadlines. These are the six reasons organisations across East Africa trust Two Max Group.
Kenya's Finance Act is amended every year. SHIF replaced NHIF. The Affordable Housing Levy was introduced, challenged, and reinstated. NSSF tiered rates changed in February 2026. Two Max Group updates every payroll computation immediately upon gazette notice — with zero action required from the client.
Every payroll run produces a complete remittance trail — P10 returns, payment confirmations, NSSF schedules, and SHIF receipts — retained for the KRA-mandated five-year period. Our records have withstood KRA payroll audits across multiple client accounts without a single discrepancy raised.
A single missed KRA PAYE remittance generates a 5% penalty on the outstanding balance plus 1% per month compounding interest. For a business with a KES 5 million monthly payroll, a three-month delay produces over KES 400,000 in entirely avoidable penalties. Our managed calendar has never triggered a late-filing penalty.
Whether you are a foreign director drawing the first salary from a newly registered Kenyan subsidiary or a multinational scaling from 50 to 500 employees across multiple counties, Two Max Group's payroll infrastructure expands to match your headcount without onboarding delays or capacity constraints at any stage.
No other Kenya provider combines managed payroll with Employer of Record, Company Registration, Work Permits, and Corporate Secretarial services under a single engagement — eliminating the coordination delays that typically add three to six weeks to a market entry timeline.
Foreign employers funding payroll in USD, GBP, EUR, or other major currencies receive full KES conversion handling, CBK-compliant remittance documentation, and consolidated payroll reports formatted for group treasury, international audit, and transfer pricing disclosure requirements where applicable.
Kenya Statutory Payroll Deductions 2026: PAYE, SHIF, NSSF & Housing Levy
Every employer operating payroll services in Kenya is legally required to compute, deduct, and remit four statutory obligations every month — PAYE income tax, SHIF health contributions, NSSF pension, and the Affordable Housing Levy — in addition to issuing itemised payslips and maintaining 5-year records under the Employment Act, Cap 226. The rates below reflect the current position under the Kenya Revenue Authority and Finance Act 2025, effective for all payroll periods from January 2026.
These obligations are not discretionary. They apply from the first payroll run of every employee, regardless of the employer's size, nationality, or industry sector. Two Max Group's managed payroll service handles every computation, filing, and remittance on your behalf — with a zero late-filing record maintained across all client accounts since inception.
PAYE Tax Bands Kenya 2026: the complete rate table
PAYE (Pay As You Earn) is the primary income tax deducted from every employee's salary in Kenya. It is computed by the employer on a gross-to-net basis using five progressive tax bands set by the Kenya Revenue Authority under the Finance Act 2023 — which remain in force for 2026. PAYE is due for filing on KRA iTax by the 9th of the following month via the monthly P10 return, with simultaneous payment remittance.
From 27 December 2024, both SHIF contributions and the Affordable Housing Levy employee share are fully tax-deductible — subtracted from gross salary before PAYE bands are applied. Employers who fail to apply these pre-tax deductions will over-withhold PAYE, creating a KRA overpayment position and potential disputes with employees at year-end. Personal relief of KES 2,400 per month (KES 28,800 annually) is applied after tax computation for all qualifying resident employees.
Source: KRA PAYE — Finance Act 2023, effective 1 July 2023 and current through 2026.
The three statutory deductions beyond PAYE
PAYE is the most visible payroll deduction in Kenya but it is not the only one. Every employer must also remit three additional statutory levies every month — SHIF, NSSF, and the Affordable Housing Levy. Together these add approximately 6.65% of gross salary to the employer's monthly cost of employment, on top of gross salary, for every employee on the payroll. Two Max Group computes and remits all four deductions in a single managed process.
SHIF replaced NHIF effective 1 October 2024 under the Social Health Insurance Act, 2023. There is no salary cap — 2.75% applies to the full gross salary at every income level.
NSSF tiered pensionable pay bands — effective February 2026:
| Tier | Pensionable Pay Range (KES) | Max Contribution Each |
|---|---|---|
| Tier I | Up to 9,000 | KES 540 |
| Tier II | 9,001 – 108,000 | KES 5,940 |
Employers with a qualifying occupational pension scheme may opt out of Tier II contributions under the NSSF Act. Speak to Two Max Group to assess eligibility.
Introduced by the Finance Act 2023 and reintroduced under the Affordable Housing Act 2024 effective 19 March 2024 following a legal challenge. No salary cap applies. Both the employer and employee each contribute 1.5% of the employee's gross monthly salary, with both contributions remitted by the employer to KRA by the 9th of the following month.
On a gross salary of KES 100,000, the employer's total monthly statutory obligation — NSSF Tier I & II employer share + Housing Levy employer share — adds approximately KES 8,040 on top of gross salary, before any other employment cost. This is in addition to withholding and remitting the employee's PAYE, SHIF, NSSF, and Housing Levy deductions. Two Max Group computes and remits every item under one managed payroll service. Explore our EOR service for fully costed employment without a local entity.
Kenya payroll deadlines and KRA penalty structure
Non-compliance with KRA payroll deadlines is one of the most common and most costly regulatory risks for employers in Kenya. Unlike many jurisdictions where a grace period exists, the Kenya Revenue Authority applies penalties from the first day after the deadline — with no discretionary waiver for first-time or administrative delays.
A 5% penalty on the outstanding PAYE balance applies immediately after the 9th-of-month deadline, plus 1% per month compounding interest until the full balance — including the penalty — is settled. There is no cap on the accruing interest charge.
Where an employer fails to deduct PAYE at source — for example by paying net salaries without withholding — KRA may assess a 25% penalty on the total undeducted tax, plus recovery of the full PAYE amount from the employer directly, regardless of whether the employee has paid any personal income tax.
The NSSF Act 2013 prescribes a 5% surcharge on late contributions, plus the right for NSSF to recover contributions directly from the employer as a civil debt. Non-remittance is additionally a criminal offence under the Act.
Allowable deductions that reduce PAYE liability
Properly structuring employee remuneration packages with allowable deductions is the most straightforward and fully legal method of reducing the PAYE liability for both employer and employee in Kenya. Two Max Group advises all payroll clients on compliant remuneration structuring during onboarding — an exercise that routinely reduces effective PAYE rates by 8–15% for senior employees without any change in gross cost to the employer.
All deductions below are recognised by KRA under the Income Tax Act, Cap 470, and the Finance Act 2025 amendments. They must be correctly coded in the P10 monthly return and supported by appropriate documentation to withstand audit scrutiny.
- ✓Personal Relief — KES 2,400/month: Applied automatically to every qualifying resident employee after PAYE computation. Non-resident employees are not entitled to personal relief under the Income Tax Act.
- ✓Registered Pension Contributions — up to KES 30,000/month: Employee contributions to a KRA-approved occupational pension scheme or NSSF are fully deductible before PAYE is computed, up to the monthly cap. This is the single most impactful deduction available for senior employees.
- ✓SHIF Contributions — 2.75% of gross: Fully deductible from gross salary before PAYE computation effective 27 December 2024. Employers must ensure this is correctly applied in every payroll run to avoid over-withholding.
- ✓Affordable Housing Levy — employee share 1.5%: Fully deductible from gross salary before PAYE computation effective 27 December 2024. Applied alongside SHIF before the progressive tax bands are applied.
- ✓Owner-Occupier Mortgage Interest — up to KES 30,000/month: Available to employees with a qualifying mortgage on their principal private residence in Kenya. Must be supported by a letter from the lending institution and applied consistently each month.
- ✓Insurance Relief — up to KES 5,000/month: Available for premiums paid on life, education, or health insurance policies under a registered Kenyan insurer. Supporting documentation required for KRA audit purposes.
- ✓Disability Exemption — up to KES 150,000/month: The full monthly exemption is available to employees certified as persons with disability by the National Council for Persons with Disabilities (NCPWD). Certification must be on file before the exemption is applied.
Let us handle every deduction, every month.
Managing PAYE bands, SHIF, NSSF tiered rates, Housing Levy, and annual Finance Act amendments in-house is a full-time compliance function. Two Max Group takes full ownership of every computation, filing, and remittance — so your team focuses on running the business, not monitoring the KRA calendar.
We also integrate payroll with Employer of Record, Company Registration, and Work Permits — making us Kenya's only fully integrated market entry partner.
The Kenya payroll process —
step by step, every month
Two Max Group runs a structured, six-step payroll cycle for every client account — from payroll data intake through to statutory remittance and final reporting. Every step is managed internally, with zero administrative burden on the client.
At the start of every payroll period, Two Max Group collects confirmed payroll data from the client — gross salaries, approved allowances, new starters with employment contract details, leavers with final settlement computations, any mid-month salary changes, and approved overtime or commission payments. All data is verified against the previous cycle before computation begins. No data, no errors — our structured intake process eliminates the discrepancies that cause KRA penalty risk downstream.
Every employee's gross-to-net is computed against the current statutory rates: KRA PAYE on the applicable tax band (10% to 35%), NSSF Tier I and Tier II contributions for both employee and employer, SHIF at 2.75% of gross salary, and the Affordable Housing Levy at 1.5% each — employee and employer. Personal relief of KES 2,400 per month is applied to every eligible employee. Any applicable HELB deductions, pension contributions, or salary advance recoveries are incorporated at this stage.
Finance Act vigilance: Our computation engine is updated immediately upon any gazette notice — eliminating the risk of computing against superseded rates that in-house teams frequently miss mid-year.
A detailed payroll register is prepared showing every employee's gross pay, all deductions itemised by statutory category, net pay, and employer cost summary — and submitted to the client for review and approval before a single shilling is disbursed. This approval step is non-negotiable: it is the client's final check before execution, and it forms part of the audit trail that protects against internal disputes and external KRA queries. The report format can be configured to align with group treasury or CFO reporting requirements.
Upon client funding confirmation, net salaries are disbursed directly to employee bank accounts in Kenya Shillings. For clients funding from overseas in USD, GBP, or EUR, Two Max Group coordinates the CBK-compliant inward remittance, FX conversion, and local disbursement — with full documentation for the client's foreign exchange records. Itemised payslips are distributed to every employee simultaneously — a legal requirement under the Employment Act, Cap 226. M-Pesa disbursement is available for field-based or unbanked employees where required.
The monthly PAYE P10 return is filed on KRA iTax and the full PAYE remittance is executed — guaranteed before the 9th of the following month. Missing this deadline triggers a 5% penalty on the outstanding PAYE balance, plus 1% compounding monthly interest for every month the balance remains outstanding. Two Max Group has never submitted a late P10 return for a managed client account. iTax acknowledgement receipts are archived for every filing.
Simultaneously with the PAYE filing, employer and employee NSSF contributions are remitted to the National Social Security Fund, SHIF contributions are remitted to the Social Health Authority, and the Affordable Housing Levy is remitted to the designated account. Every remittance is documented with a payment confirmation retained for audit purposes. A comprehensive monthly payroll report — covering all deductions, remittances, employer cost, and variance against prior month — is issued to the client within 3 business days of cycle close, formatted for direct upload to accounting systems including QuickBooks, Xero, and Sage.
Everything included in Two Max Group payroll services in Kenya
A fully managed payroll engagement with Two Max Group covers every statutory, administrative, and reporting obligation — with no hidden extras and no scope creep. This is the complete standard scope for every managed payroll account.
The following services are available as add-ons to the standard managed payroll engagement — speak to our team during the scoping call to include any of these in your proposal.
Calculate your Kenya PAYE & net pay instantly
Use our Kenya PAYE calculator to compute gross-to-net salary, PAYE liability, NSSF contributions, SHIF, and Affordable Housing Levy for any employee — updated for Finance Act 2025 rates. Free to use, no registration required.
Illustrative only. Use the full calculator for exact figures and all scenarios.
What do payroll services in Kenya cost in 2025–2026?
Payroll outsourcing pricing in Kenya varies by headcount, complexity, and service scope. Two Max Group provides fixed monthly pricing with no per-transaction fees and no hidden extras — with every engagement scoped and priced before a single invoice is raised. Request a proposal for an exact quote within 24 hours.
- Full gross-to-net computation
- KRA P10 filing monthly
- NSSF, SHIF, Housing Levy remittance
- Itemised payslips
- Annual P9 tax certificates
- Everything in Starter
- Multi-currency funding support
- Accounting system integration
- CFO-ready payroll register
- KRA audit support — full history
- Dedicated payroll manager
- Everything in Growth
- Expatriate shadow payroll
- Group consolidated reporting
- Transfer pricing payroll docs
- Donor compliance reporting (NGOs)
- EOR + payroll integration
The cost of outsourced payroll services in Kenya is determined primarily by headcount, payroll complexity, and whether add-on services are included. For most businesses with 1–50 employees and a standard payroll structure, a fully managed payroll outsourcing engagement typically costs significantly less than the salary of even a junior in-house payroll officer — with the added benefit of full statutory compliance, Finance Act currency, and KRA audit protection.
For multinationals and NGOs, the value calculation is different — the relevant comparison is not in-house salary cost but the penalty exposure and KRA audit risk that comes with under-resourced in-house payroll. A single KRA payroll audit finding against a company with a KES 10M monthly payroll can generate penalties exceeding KES 1M in arrears and interest before the matter is resolved. Two Max Group's managed payroll eliminates this risk entirely.
All engagements are priced transparently on a fixed monthly retainer — no per-employee fees, no per-payslip charges, no surprise invoices. The exact price for your account is confirmed in writing before onboarding. Request your proposal and receive a fixed-fee quote within 24 hours.
Payroll services in Kenya built for every sector
Two Max Group manages payroll for organisations across every major industry operating in Kenya — from technology and financial services to development organisations, manufacturing, and professional services. Each sector carries distinct payroll complexity; our team is experienced across all of them.
Foreign companies entering Kenya through a registered subsidiary face immediate payroll obligations from the first hire. Two Max Group activates compliant payroll within 48 hours of incorporation — managing multi-currency funding, expatriate PAYE treatment, work permit payroll integration, and consolidated group reporting for parent treasury from month one.
International NGOs operating in Kenya carry dual compliance obligations — statutory payroll compliance with KRA alongside donor-specific payroll reporting requirements for USAID, FCDO, UN agencies, and bilateral funders. Two Max Group produces payroll reports in donor-compliant formats, manages exempt staff payroll treatment, and maintains audit-ready records for external programme auditors.
Kenya's technology sector — centred on Nairobi's Silicon Savannah ecosystem — employs a mix of highly compensated senior engineers, remote-working developers, and field-based operations staff. Two Max Group manages equity-adjacent compensation structures, ESOP payroll treatment, and rapidly scaling headcounts — with EOR available for companies not yet ready to incorporate a full Kenyan entity.
Financial services employers in Kenya face layered payroll scrutiny — from KRA PAYE to Central Bank of Kenya employment reporting requirements. Two Max Group's payroll team has direct experience with licensed bank and fintech payroll — managing large salary structures, substantial performance bonuses, and the detailed audit trails that regulated employers require from their payroll partner.
Manufacturers operating in Kenya's Export Processing Zones and special economic areas have distinct payroll requirements — including shift-based pay structures, overtime computation under the Employment Act, and large hourly or daily-rated workforces. Two Max Group manages high-volume payroll for manufacturing and industrial employers with full Employment Act compliance across all pay categories.
Professional services firms — including consulting firms, law firms, and accounting practices — often carry complex partner and senior staff remuneration structures with variable components, non-cash benefits, and partner loan arrangements. Two Max Group handles benefit-in-kind payroll treatment, partner drawings structures, and the detailed P9 documentation that professional staff require for their personal tax filings annually.
Speak to our Kenya payroll team — we'll confirm the right engagement structure, whether that's managed payroll, EOR, or a combination of both — and provide a fixed-fee proposal within 24 hours.
Payroll services in Kenya — questions we answer every week
The questions below are the ones our team answers most frequently from businesses entering Kenya or seeking to outsource their payroll management — answered fully and accurately.
From the first day any employee is engaged by the company in Kenya — whether they are on an employment contract or a service agreement treated as employment under the Employment Act, Cap 226. There is no grace period. If a director is drawing remuneration from a newly registered company, PAYE applies from the first payment. Two Max Group activates compliant payroll within 48 hours of engagement.
Under the Finance Act 2023 (current for 2025–2026): 10% on monthly income up to KES 24,000; 25% on KES 24,001–32,333; 30% on KES 32,334–500,000; 32.5% on KES 500,001–800,000; and 35% above KES 800,000. Personal relief of KES 2,400 per month applies. All rates are applied progressively — not as a flat rate on total income.
The KRA imposes a 5% penalty on the outstanding PAYE balance for any P10 return filed after the 9th of the month following the payroll period, plus 1% compounding monthly interest for every month the balance remains outstanding. For a company with a KES 3M monthly payroll, a single missed filing can generate KES 150,000 or more in penalties before the month is out.
Yes — through an Employer of Record (EOR) arrangement. Two Max Group acts as the legal employer for staff in Kenya, running fully compliant payroll under our own entity while the foreign company directs the work. This allows immediate market entry without entity setup delays, with payroll live within 48 hours. Once the foreign company decides to incorporate, the employees can be transferred to the new entity.
The National Hospital Insurance Fund (NHIF) was replaced by the Social Health Authority (SHA) and the Social Health Insurance Fund (SHIF) under the Social Health Insurance Act 2023, with effect from October 2024. The SHIF contribution rate is 2.75% of gross salary — paid by the employee only. Unlike NHIF which had fixed tiers, SHIF is fully proportional — higher earners contribute more. The employee SHIF contribution became tax-deductible from 27 December 2024.
The Affordable Housing Levy (AHL) was introduced under the Finance Act 2023, effective 19 March 2024. Both employee and employer each contribute 1.5% of the employee's gross salary monthly — a total of 3% of gross salary. The employee's 1.5% AHL contribution became tax-deductible from 27 December 2024. The levy is remitted to the Kenya Revenue Authority monthly alongside PAYE, with penalties for late remittance applying at the same rate as PAYE.
Under the NSSF Act 2013 (tiered structure effective February 2025+): Tier I — 6% employee + 6% employer on earnings up to KES 9,000; Tier II — 6% employee + 6% employer on earnings between KES 9,001 and KES 108,000. The maximum total monthly NSSF contribution (employee + employer) for a high earner is therefore KES 12,960. Both Tier I and Tier II employer contributions are deductible for corporation tax purposes.
Yes — NGO payroll is a core specialism. Two Max Group manages payroll for international NGOs, UN agency implementing partners, faith-based organisations, and development finance institution grantees operating in Kenya — with donor-compliant payroll reports (USAID, FCDO, EU formats), exempt staff payroll treatment, and audit-ready records for external programme auditors. We understand the dual compliance burden that international NGOs carry and have built our service to address it fully.
Within 48 hours of engagement confirmation for most accounts. For companies incorporating a new entity simultaneously with payroll setup, we run both processes in parallel — so payroll is typically operational within the same week the certificate of incorporation is issued. For EOR clients not yet incorporating, payroll is live within 48 hours without any entity setup requirement at all.
Managed payroll means Two Max Group runs your payroll — computes, files, and remits — but your company is the legal employer. Employer of Record (EOR) means Two Max Group is the legal employer in Kenya: the employment contract is between the employee and Two Max Group, and we manage all payroll and employment obligations. EOR is used when you want to engage staff in Kenya without incorporating your own entity. Both services can be used together: learn more about our EOR service.
Yes — and it is often the most cost-effective option. A company with 1–3 employees in Kenya still carries the full statutory payroll obligation: monthly P10 PAYE filing, NSSF, SHIF, Housing Levy remittance, itemised payslips, and annual P9 certificates. Engaging a qualified payroll officer in-house to manage this costs significantly more than a managed payroll retainer — and carries the additional risk of that officer being unfamiliar with Finance Act amendments made mid-year.
Yes — Two Max Group provides payroll services across all 47 counties in Kenya, not just Nairobi. We manage payroll for employers with field staff in Mombasa, Kisumu, Eldoret, Nakuru, and remote county operations. Payroll processing and statutory filing is centralised at our Nairobi office, with no geographic limitation on the employee locations we cover. Bank disbursement covers all major Kenyan commercial banks and M-Pesa for unbanked employee populations.
Tell us your headcount, current payroll complexity, and preferred start date — our team will prepare a complete scope and fixed monthly fee proposal, with no obligation and no hidden costs.