In 2026, the Kenyan payroll landscape has shifted from simple math to strategic compliance. With the final implementation of the NSSF Act, the 2.75% SHIF (Social Health Insurance Fund) with no upper cap, and the permanent status of the Housing Levy, your payroll software can no longer be a glorified calculator.
To protect your business from KRA audits and ensure employee trust, here is what your payroll solution must deliver this year:
1. Automated Statutory Sequencing
In 2026, NSSF, SHIF, and the Housing Levy are fully tax-deductible. This means they must be subtracted from the gross pay before PAYE is calculated. If your system still calculates tax on the full gross amount, you are over-taxing your employees and under-reporting their take-home pay. Look for a solution that handles this sequence automatically.
2. Tier I and Tier II NSSF Splitting
The February 2026 update pushed the Upper Earnings Limit to 108,000 KES. Your solution must be able to instantly differentiate between Tier I (the 9,000 KES base) and Tier II (up to the 108,000 KES limit) contributions. Manual tracking of these splits is now a high-risk activity that leads to incorrect remittances.
3. API-Based Statutory Filing
The era of manual CSV uploads to the iTax or NSSF portals is ending. Modern solutions in 2026 use Direct API integration to push data directly to government portals. This eliminates the "upload error" headache and ensures that what is in your payroll is exactly what is reflected in government records.
4. Real-Time Employee Self-Service (ESS)
With contributions hitting record highs (up to 12,960 KES for NSSF alone), employees are more protective of their payslips than ever. A future-ready system provides a mobile app or portal where staff can view their real-time deduction proof, update their next-of-kin details, and download tax-ready payslips.
5. Automatic Relief Application
Under the current Finance Act, employers are legally mandated to apply all eligible tax reliefs—including Personal, Insurance, and Housing Relief—during monthly processing. Your payroll solution should proactively identify and apply these reliefs to maximize employee net pay without manual intervention.
Secure Your Payroll Accuracy Today
Managing 2026 statutory requirements manually puts your business and your employees' retirement at risk. FaidiHR automates Tier I and Tier II splits, SHIF deductions, and tax reliefs, ensuring every cent is tracked and remitted correctly.
Call 254 702 339 699 or Email sales@faidihr.com to schedule a demo and ensure your company’s payroll is 100 percent compliant.