A statutory deduction is a mandatory deduction the employer has to take out of the employees paychecks.

In Kenya statutory deductions are a legal requirement where every employer must on behalf of the relevant bodies deduct from the employees salaries and remit the same to the Government through those bodies.

Basic statutory deductions in Kenya:

• P.A.Y.E TAX

It is a tax collected from gainful employment.

Gains or Profits includes: wages, casual wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment or services rendered.

PAYE is chargeable to persons of employment income of Kshs. 24,000 and above per month.

It should be filed and remitted on or before 9th of the following month failure to which

For late filing you get a 25% of the tax due or Kshs. 10,000. whichever is higher

For late payment: you are subject to a 5% of the tax due and a late payment of 1% per month on the unpaid tax until the tax is paid in full.

N.B – P.A.Y.E tax is only deducted by Companies and not Business Names

• N.H.I.F

This is a deduction made by the employer which caters for the employees medical matters.

It amount deductible is dependent on the prevailing rates.

It should be filed and remitted on or before 9th of every calendar month.

 

• N.S.S.F

Normally, the employer pays half and the employee pays the other half of the amount remitted.

Currently most of the employers are still using the old rates of Ksh.200 for both employer and employee.

It should be filed and remitted before 15th of every month.

 

Engage our team for management of the statutory deductions for your business.

We are here to keep you as compliant as possible.

BENEFITS OF HAVING A WELL MAINTAINED PAYROLL SYSTEM.

• Lower Costs

In addition to reducing the probability of costly penalties, hiring a company to manage your payroll can save you money in other ways. Payroll outsourcing usually costs less than managing payroll internally. Particularly for small to medium businesses, the price to pay for training and the labor hours spent processing payroll in-house generally add up to more than the price of outsourcing

• Saved Time

Not having someone process payroll internally can not only save you money but also time. When one of your employees has to work on payroll every couple of weeks or once a month, they are spending less time actually doing their job. Because payroll takes a lot of time and attention to detail to prevent errors, outsourcing to a professional company can increase efficiency.

• Better Security

By processing payroll in-house, you may be putting yourself at a greater security risk. Even though you may trust your employees, there is always a chance personal information could accidentally get shared or be seen in the office. This could lead to potential identity theft, messing with company records, manipulating payments or embezzling money in extreme cases.

• Payroll Providers Help You Save on Headcount

The most expensive asset in your business is, or will be, the people. Hiring the right staff is crucial to your business’s success but so is operating within your budget. Fortunately, choosing the right payroll system can mean not only paying your employees efficiently, but also automating some of your human resources tasks.

• Payroll Can Help You Avoid Unnecessary Fines and Fees:

Payroll will help you avoid unnecessary fines and fees for example tax and payroll penalties. This might not keep your employees happy, but it keeps the government and legal system happy.

• Increases Employee Morale

As mentioned earlier, employees rely on their compensation to keep them motivated to perform their duties to maximum best.

Payroll plays a huge impact on employee’s morale. When payroll is late, employees start to question your business’s financial integrity.

This might eventually lead to them under-performing while others will leave without prior notice to look for better opportunities. Therefore, it is important to keep timely payroll.

• Payroll Providers Help You Maintain Employer Compliance