Payroll in Kenya

Are you thinking about taking your business global? Investigating the prospect of employing workers or independent contractors in Kenya can reveal a plethora of skilled individuals and promising career paths. Even though employing internationally has several advantages, it is important to know the specifics of Kenya’s payroll procedure before taking this step.

Collaborating with a qualified payroll service provider such as EOR Services is a wise decision in order to streamline and accelerate the process. Explore the nuances of Kenya’s payroll processes in further detail and discover how EOR Services can help with a quicker, more fluid recruiting process at a much lower cost than handling it on your own.

What does the payroll process in Kenya involve?

While the payroll process in Kenya exhibits similarities with familiar workflows, significant variations in Kenyan payroll laws, tax percentages, and working hours warrant attention, as explored later in this guide. Onboarding Kenyan workers onto your payroll involves critical steps. The initial requirement involves gathering essential information from new hires, whether they are employees or contractors, with employers obligated to withhold income, national hospital fund, national social security fund, and national housing development fund taxes for each worker. Calculating gross pay, which represents the amount owed before deductions, is determined by hours worked and the rate of pay. Subsequently, net pay, factoring in taxes and benefits, indicates the amount to be disbursed to workers. Adhering to Kenya’s payroll laws requires timely monthly payments and meticulous record-keeping. Employers are further tasked with submitting deducted taxes to the appropriate authorities, involving reporting to four regulatory agencies. Despite the apparent simplicity of these steps, the intricacies of compliance with numerous laws underscore the importance of a thorough understanding. For instance, essential obligations include the monthly submission of income taxes to the Kenya Income Authority and contributions to the National Social Security Fund by the 15th of the following month. Navigating these complexities can be resource-intensive, making a partnership with EOR Services an invaluable solution. By entrusting them with the payroll process, businesses can ensure not only efficiency but also 100% compliance with Kenya’s legal requirements.

What do you need to know about payroll in Kenya?

Before processing payroll in Kenya, companies need to be aware of a few things. The following are subject to rules and regulations:

• Minimum pay
• Overtime
• Hours of work
• Cycles of payroll
• entitlement to leave
• severance compensation.

Each of them will be covered in more depth below.

Payroll Basics	The Kenyan Shilling (KES) is the unit of currency in Kenya. 1 KES is equal to.0087 USD, or, to make it simpler to understand, 1 USD is equal to about 115 KES. Kenyan workers receive their paychecks on the final day of each month as part of a monthly payroll cycle. Daily payment is anticipated of casual laborers.
Working hours	Kenya has many regulations regarding working hours. Although a typical workweek consists of 52 hours, most employers only allow 45 hours. The maximum number of hours that day workers can put in in a two-week period is 116. Workers who work nights are only permitted to work 60 hours a week. Additionally, 144 hours is the maximum for two weeks. In certain industries in Kenya, collective bargaining agreements exist that may have an effect on working hours.
Overtime rules	Except in cases where the employment contract specifies otherwise, overtime is compensated at 150% of hourly rates. An employer is obligated to pay 200% of the usual pay rates if they ask a person to perform overtime on a public holiday or weekend.
Minimum Wage requirements	Kenya’s minimum wage is subject to change depending on the sector and region. Typically, the range falls between 30,627.45 KES and 13,572.90 KES. It’s critical to comprehend the minimum wage laws that apply to your particular industry. Businesses that pay employees less than the minimum wage face harsh repercussions.
Employment leave entitlements	Employees in Kenya are granted a minimum of 21 paid days off after completing one year of employment. The country also observes 13 paid public holidays, including New Year’s Day, Good Friday, Easter Monday, Labour Day, Eid al-Fitr, Madaraka Day, Eid al-Adha, Huduma Day, Mashujaa Day, Jamhuri Day, Christmas Day, and Utamaduni Day. After two months with an employer, workers are entitled to 7 days of 100% paid sick leave, with an additional 7 days at 50% of the normal pay rate. In terms of maternity leave, pregnant employees are eligible for three months of 100% pay, requiring a one-week notice before commencement. In adoption cases, workers can take three months of 100% paid leave, with a two-week notice. Paternity leave for birth or adoption stands at two weeks of paid leave. Parents in the process of adopting a child can receive a full month of paid leave with the necessary documentation and notice.
Severance Pay	In Kenya, severance compensation is only necessary in the event of layoffs. Employers must provide those workers with 15 days of severance compensation for each year of service.

Kenya payroll taxes and deductions

Payroll in Kenya is regulated by four authorities, and employers are mandated to make contributions and deductions on behalf of their workers. These authorities are:

1. Kenya Revenue Authority (KRA)
2. National Social Security Fund (NSSF)
3. National Hospital Insurance Fund (NHIF)
4. Directorate of Industrial Training (DITA)

Employer contributions encompass a 5% NSSF contribution, capped at 200 KES monthly, a 1.5% contribution to the National Housing Development Fund, and a fixed amount of 50 KES per employee.

On the other hand, employee contributions include a 5% contribution to the NSSF, a 1.5% contribution to the National Housing Development Fund, and NHIF contributions ranging from 150 to 1,700 KES for employees earning more than 100,000 KES monthly. Additionally, employees are subject to income tax at varying rates based on income brackets:

• 10% for those earning up to 24,000 KES monthly
• 20% for those earning up to 32,333 KES monthly
• 30% for those earning more than 32,333 KES monthly

Payroll compliance in Kenya

It is essential for employers to understand and abide by the aforementioned rules. Kenyan authorities may levy penalties and fines for failure to comply. On its website, the Kenya Revenue Authority lists a number of penalties for infractions such failing to file, filing late, and failing to apply deductions. Although the penalty amounts are subject to change, they often range from 5% to 10% of the total amount owed.

It’s critical to avoid giving Kenyan regulatory officials a bad image. Seeking to work with an experienced provider of EOR Services will help to guarantee tight adherence to regulations and reduce the possibility of fines. Speak with an EOR Services specialist right now to learn more about your company’s responsibilities with Kenyan worker compensation and to take proactive measures to maintain your good reputation with authorities.

Payroll providers in Kenya: How to start building your team

Businesses face serious risks when attempting to manage global payroll alone due to the complexity and costs involved. Forming an organization in Kenya entails a wide range of operational duties, such as hiring a local attorney to make sure that all applicable laws are followed and that regulations are kept up to date.

When a business expands internationally, maintaining private personnel records becomes a difficult undertaking. The benefits of working with a payroll service provider include time and money savings. These suppliers are skilled in managing private records, guaranteeing complete adherence to area laws, and verifying wages to meet local standards.

Payroll outsourcing has a plethora of benefits to businesses, acting as a beneficial collaborator in expanding operations and mitigating worries regarding regulatory intricacies in overseas regions. This is especially helpful for startups and SMEs looking to grow quickly. Furthermore, working with an outsourced provider gives smaller organizations access to advantages and technologies that they might not otherwise have.