A 2024 global survey found that 1 in 2 businesses had previously been penalized for payroll mistakes. That’s not surprising, seeing as payroll is one of the most laborious parts of HR, even with software in place.
In the same survey, many small and mid-sized companies reported their biggest payroll pain points as:
- Spending too much time on manual tasks
- Dealing with inconsistent or inaccurate data
- Using systems that don’t integrate
- Lack of a standard process
These issues often lead to late filings, tax miscalculations, and non-compliance, all avoidable with the right payroll processing services in Kenya.
That’s the primary reason why more Kenyan businesses outsource payroll. It’s a smart move that will reduce risk, ensure compliance, and free up your internal HR team to focus on growth.
Read on to understand how payroll processing works in Kenya, what the law expects, and whether it’s time to outsource to a firm like Bridge Talent Management.
What Is Payroll Processing and Why Is It Crucial for Kenyan Employers
Payroll processing is the system behind how employees are paid. It covers everything from calculating salaries and applying deductions to filing taxes and staying in line with Kenyan labour and tax laws.
When done well, payroll keeps your team motivated with on-time salaries and your business compliant.
In Kenya, payroll processing involves:
- Working out employee pay based on attendance, bonuses, overtime, and contracts
- Applying mandatory deductions like PAYE, SHIF, NSSF, and the Affordable Housing Levy
- Submitting returns to KRA and other statutory bodies
- Providing payslips and records like the P9 and P10 forms
Kenya’s payroll regulations are strict, and missing a single step can result in penalties, strained employee trust, and serious compliance issues.
For SMEs and even established companies, handling this in-house can quickly become overwhelming. The laws change just as fast, deadlines are usually tight, and the cost of errors is high.
Hiring a partner like Bridge Talent Management can help alleviate these issues.
Instead of chasing deadlines or second-guessing compliance rules, you get a system that just works.
Your records stay clean, your employees are paid right and on time, and your team can focus on building the business, not fixing payroll mistakes. Find out how Bridge Talent Management can help with this.
Step-by-Step Payroll Processing in Kenya
Most business owners dread payroll processing. It’s complex, time-consuming, and comes with serious consequences if you make mistakes. However, breaking down the process can make it a tad bit more manageable.
Here are the Payroll processing steps in Kenya.
1. Collect employee data
You’ll need complete records of attendance, overtime hours, basic pay rates, applicable deductions, bonuses, and reimbursements for each employee. This data determines everything that follows, so accuracy is non-negotiable.
2. Calculate gross pay and applicable deductions
Next, work out each employee’s gross pay by adding their basic salary to any additional earnings. Then subtract all required deductions:
- Affordable Housing Levy (1.5% of gross salary)
- SHIF contributions (2.75% of gross salary, minimum KSh 300)
- NSSF contributions (6% from both employer and employee)
- Any other deductions like HELB loan repayments or SACCO contributions
- Pay As You Earn (PAYE)
Note that Kenyan employees are entitled to the following four reliefs on their income tax:
- Personal Relief: KSh 2,400 monthly or KSh 28,800 annually
- Insurance Relief: 15% of premiums paid (up to KSh 60,000 per year)
- Mortgage Interest Relief: Up to KSh 30,000 monthly for qualifying loans
- Pension Contributions: Up to KSh 30,000 monthly
3. Disburse salary and generate payslips
After you calculate net pay, transfer the funds to employee accounts and create detailed payslips. Most businesses in Kenya use bank transfers.
4. Submit statutory deductions to KRA and relevant bodies
This is a necessary step that your business cannot afford to miss. The Kenya Revenue Authority (KRA) requires firms to file a PAYE return and make payment of the taxes deducted from employees by the 9th of the following month.
Key Statutory Deductions in Kenya
These are the six contributions employers must deduct and remit on behalf of their employees.
PAYE in Kenya: how it’s calculated
PAYE is the income tax deducted from employee salaries. The calculation follows Kenya’s progressive tax bands, with relief applied before determining the final amount.
These are the current tax bands in 2025 to work with.
| Monthly Pay Bands (Ksh.) | Annual Pay Bands (Ksh.) | Rate of Tax (%) |
| On the first KSh 24,000 | On the first KSh 288,000 | 10% |
| On the next KSh 8,333 | On the next KSh 100,000 | 25% |
| On the next KSh 467,667 | On the next KSh 5,612,000 | 30% |
| On the next KSh 300,000 | On the next KSh 3,600,000 | 32.5% |
| On all income above KSh 800,000 | On all income above KSh 9,600,000 | 35% |
| Personal Tax Relief | ||
| KShs. 2,400.00 | KSh 28,800 (Annually) |
NSSF contributions in Kenya: new rates and compliance
As of February 2025, both you and your employees will contribute 6% of each salary to NSSF. The system works in two tiers:
Tier 1: For the first KSh 8,000 of monthly income
Your contribution: KSh 480
Employee’s contribution: KSh 480
Total Tier 1: KSh 960
Tier 2: For income between KSh 8,001 and KSh 72,000
Your contribution: KSh 3,840
Employee’s contribution: KSh 3,840
Total Tier 2: KSh 7,680
| Category | Amount (KES) |
| Lower Limit (Tier 1) | Ksh 8,000 |
| Total Contribution by Employee (Tier 1) | Ksh 480 |
| Total Contribution by Employer (Tier 1) | Ksh 480 |
| Total Tier 1 NSSF Contributions | Ksh 960 |
| Upper Limit (Tier 2) | Ksh 72,000 |
| Contribution on Upper Limit (6% of Upper Limit less Lower Limit) | Ksh 3,840 |
| Total Contribution by Employee (Tier 2) | Ksh 3,840 |
| Total Contribution by Employer (Tier 2) | Ksh 3,840 |
| Total Tier 2 NSSF Contributions | Ksh 7,680 |
| Total NSSF Contributions | Ksh 8,640 |
Source: KPMG
SHIF contributions in Kenya: income bands and deadlines
The Social Health Insurance Fund(SHIF) replaced NHIF in 2024. Contributions are now set at 2.75% of gross salary, with a minimum of KSh 300 monthly. Like other deductions, these payments are due by the 9th of the following month.
Affordable Housing Levy (AHL)
Since March 2024, both you and your employees must contribute 1.5% of gross monthly salary to AHL. This payment is due by the 9th working day after the month ends. Late payments attract a 3% monthly penalty on outstanding amounts.
HELB loan repayments
If you employ HELB loanees, you must:
- Register with HELB as an employer
- Report loanees within three months of hiring
- Deduct and remit loan repayments through the HELB portal or M-PESA (for amounts under KSh 250,000)
- Notify HELB when the loanees leave your company
Late remittance of HELB payments attracts a 5% monthly penalty.
SACCO and other deductions
These types of deductions vary by employee but can include:
- SACCO contributions and loan repayments
- Union dues and agency fees
- Other loan repayments (not exceeding 50% of wages)
Payroll Compliance Requirements in Kenya
To avoid penalties, be sure to keep in mind all these requirements:
1. KRA registration
Before you can pay your employees or handle taxes, your business must be registered with the KRA. This allows the government to track tax obligations for your business, including PAYE.
2. Filing PAYE returns and meeting tax deadlines
Employers are required to file PAYE returns by the 9th of each month. These returns must reflect the tax deducted from employees’ salaries for the previous month.
Late Filing
If the PAYE return is filed after the 9th, the penalty will be the higher of 25% of the tax due or KSh 10,000.
Late Payment
If the tax payment is delayed, the following penalties will apply:
- A 5% penalty on the unpaid amount
- 1% interest per month (or part of a month) until full payment is made
Failure to Deduct or Remit Tax
If PAYE is not deducted or submitted at all, the penalty will be the higher of 25% of the tax involved or KSh 10,000.
3. Ensure you keep accurate records
Beyond the filing deadlines, Kenyan law requires that you maintain proper records of:
- Employee details such as name, ID, salary, attendance, bonuses, commissions, etc.
- Deductions: PAYE, NSSF, NHIF, and the AHL.
- Payslips: While not mandatory, payslips help employees track their income and keep things transparent between you and your team.
Don’t forget the P9 form. You must provide this annual summary to each employee by the end of the calendar year. The form shows an employee’s total earnings, deductions, and taxes paid.
Legal penalties for non-compliance
- PAYE non-compliance can fetch you a 25% penalty or KSh 10,000, plus interest.
- NSSF missed contributions may result in fines of up to KSh 50,000 per violation, plus a 5% penalty per month.
- AHL late submissions can cost you 3% in penalties.
- If you don’t remit HELB loan repayments on time, you’re looking at a 5% penalty every month.
How outsourced payroll ensures payroll compliance in Kenya
Payroll compliance is a constant juggle of deadlines, tax updates, and complex rules that can overwhelm even the most organized businesses.
That said, outsourcing to payroll processing services in Kenya can free up your time and save you thousands in legal trouble.
Outsourcing payroll offers a couple of benefits:
- Minimizes the risk of penalties by ensuring compliance with all regulations
- Frees your in-house HR team from the complexities of internal payroll management
- Brings in expert knowledge to guide through the ever-evolving Kenyan tax codes and contribution rates
Should You Outsource Payroll Services in Kenya?
If you’d rather skip the headache of payroll management or the bigger one that comes with non-compliance, outsourcing might be your best option.
In-house vs payroll outsourcing in Kenya
Payroll processing is a job in itself. Even with a dedicated HR manager, they’ll likely get caught up in the details instead of focusing on your people and company culture.
If you’re handling it yourself as a founder, it cuts into valuable time you could invest in customers, products, and employees.
On the other hand, if you outsource:
- You don’t have to stress about staying current with changing regulations or the penalties that come with mistakes.
- You’ll have accurate records of your employees’ wages, which prevent time and financial losses. Global statistics show payroll accuracy averages just 78%. Mistakes often take two or more pay cycles to fix.
- You get the flexibility to scale, so it’s not a workout each time you add employees or downsize your workforce.
Overall, outsourcing payroll in Kenya is actually more cost-effective than having a full-time team member handling payroll.
Common SME use cases
So, should you outsource payroll? It’s a yes if you are in any of these situations:
- You don’t have an in-house HR or finance team to handle payroll
- You’re spending too much time trying to calculate deductions and meet deadlines
- You’ve received penalties before for late or incorrect PAYE, NSSF, NHIF, and now, AHL submissions
- You’re scaling your business and need a more reliable payroll system
- You want to avoid compliance risks and focus on growing your company
If you’re still unsure whether you need to outsource to professional payroll firms, give us a call.
Top Payroll Service Providers in Kenya (2025 List)
If you’re looking for a reliable payroll partner in Kenya, this is our roundup of the leading providers in 2025.
1. Bridge Talent Management (BTM)
BTM is one of the most reliable firms that handles payroll outsourcing in Kenya. Working with us means that you’ll never have to worry about compliance issues.
We give you peace of mind since we take over the complete payroll process.
If the laws or compliance requirements change, you can trust our experts to be in the loop and match your payroll process to the new terms.
BTM also operates on a real-time data system. When employees join or leave your company, the system adjusts payroll records automatically.
Beyond the above basics, our comprehensive payroll system gives your staff direct access to:
- Digital payslips
- Annual P9 tax forms
- HR support channels
- Complete payroll history
- Statutory documentation
- Leave balance tracking
- Performance management tools
Our services can cater to both small enterprises and large corporations. We have the team and technology to keep payroll smooth, accurate, timely, and something you no longer have to worry about.
Best for: Businesses that want hands-off payroll processing so they can focus entirely on growth.
Rating: 5/5 on Google
2. AMSOL
AMSOL offers both software and on-site payroll management.
Their payroll processing solutions cater to businesses of all sizes to ensure you meet all statutory requirements.
They provide a more personalized experience with the option of on-site assistance for businesses that prefer a more hands-on approach.
Best for: Companies that want to manage some aspects of payroll in-house but still need professional support.
Rating: 3.9/5 on Google
3. WorkPay
WorkPay is a payroll-as-a-service provider with strong data security protocols. They specialize in managing multi-country and multi-currency payroll needs.
Their service covers all standard deductions, including withholding tax, PAYE, health and pension contributions, and other statutory remittances.
Best for: Businesses that need multi-currency support
Rating: 4.7/5 on Google
4. SeamlessHR
SeamlessHR sells payroll software that lets you manage payroll independently. It integrates smoothly with ERP platforms like Microsoft, SAP, and Oracle to ensure data synchronization is never an issue.
If you’re looking for an easy-to-use platform with powerful features, including payroll funding to maintain cash flow, this is a good pick.
Best for: Companies with in-house payroll expertise who just need reliable software
Rating: 4.0/5 on Google
5. QuickBooks Kenya for small businesses
QuickBooks is primarily accounting software that includes payroll as one of its features. It reduces manual data entry by automating payroll runs and includes time tracking functionality. This is ideal if you already use QuickBooks for accounting and want everything in one place.
Best for: Small businesses wanting to combine accounting and payroll in a single platform
Rating: 4.5/5 on Google
Payroll Software in Kenya: Best Tools for Efficiency
Even if you work with a payroll service provider instead of doing it yourself via purchased software, it’s still a good idea to check if your payroll firm in Kenya has robust, modern software capabilities.
Check for the following:
Desktop vs cloud-based solutions
Cloud-based systems give you access anywhere, automatic updates, and are reasonable if you need scalability.
Contrarily, desktop-based payroll software gives you greater control over sensitive data and functions reliably without internet connectivity. However, this comes at the cost of manual updates.
Either way, when evaluating payroll software in Kenya, look for:
- KRA integration for seamless tax filing
- Accurate tax calculation with up-to-date rates
- Professional payslip generation
- Bank transfer integration (including M-Pesa options)
- Robust data security with encryption standards
- Statutory compliance automation
Local providers vs international platforms
You can work with local payroll software in Kenya, like WageMaster, BTM’s payroll system, or choose international ones like QuickBooks, Sage Group, and Oracle.
It all comes down to your budget and needs.
However, most Kenyan businesses do better with local software since it’s built specifically for our tax system. You’ll also have access to on-site help when you face technical issues.
Managing Employee Benefits Through Payroll
We recommend integrating your HR and payroll systems to automatically handle all benefit calculations and deductions.
Your payroll system should handle:
- Health insurance premiums and NHIF contributions
- Pension and retirement benefit deductions
- Leave balances and accruals
- Performance bonuses and incentive structures
This will work even better if you outsource both HR and payroll to a single provider. There’ll be fewer discrepancies and more time for you to focus on business, not the laborious task of payroll processing.
Final Thoughts: Making Payroll Processing Stress-Free
Even a tiny mistake, like missing a PAYE deadline by just one day, can cost your business thousands in penalties. And yet half of all businesses have already been penalized for payroll errors.
You don’t have to be next.
When you outsource payroll to a reliable partner like Bridge Talent Management, you know for sure that your employees are paid accurately and your business is compliant in all the right areas.
Our experts will stay on top of every compliance rule so you don’t have to. We will take care of the time-consuming details of your payroll so you can finally have the freedom to focus on business.
Get in touch with us today to take payroll off your worry list for good.
FAQs
What are the top payroll service providers in Kenya?
The top payroll service providers in Kenya are Bridge Talent Management (BTM), AMSOL, WorkPay, SeamlessHR, and QuickBooks Kenya. BTM is rated 5/5 on Google and specializes in complete payroll outsourcing for businesses of all sizes.
Should I outsource payroll in Kenya?
It’s a good idea if you don’t want to be bogged down by complex tax calculations, compliance requirements, and filing deadlines.
What are the key payroll compliance requirements in Kenya?
A few compliance requirements to fulfill include KRA registration, filing PAYE returns by the 9th of each month, keeping accurate employee records, and providing annual P9 forms.
What are the NSSF contribution rates for employers and employees in Kenya?
Both employers and employees contribute 6% of the employee’s salary to NSSF.
How are NHIF contributions determined in Kenya?
NHIF was replaced by the Social Health Insurance Fund (SHIF) in 2024. Contributions are now set at 2.75% of gross salary, with a minimum of KSh 300 monthly.
What are the best payroll software options available in Kenya?
The best options in the market are BTM’s payroll system, WageMaster, QuickBooks, and SeamlessHR.
What statutory deductions are mandatory in Kenyan payroll?
Employers must deduct PAYE tax, SHIF contributions, NSSF contributions, and the Affordable Housing Levy from employee salaries. Additional deductions may include HELB loan repayments and SACCO contributions when applicable.
What are the steps involved in processing payroll in Kenya?
Gather employee attendance and earnings data. Next, calculate gross pay and apply all required deductions. Then, transfer funds to employee accounts and create payslips. Finally, submit all statutory deductions to KRA and other relevant authorities by the deadline.
How can employers manage employee benefits effectively in Kenya?
Employers should integrate HR and payroll systems to automatically handle benefit calculations and deductions. An effective system should manage health insurance premiums, pension deductions, leave balances, and performance bonuses, ideally through a single provider to minimize discrepancies.
Let payroll be the last thing you worry about. Outsource it to experts at BTM to free up your team and focus on actually expanding your business. Contact us for a free HR consultation!
