As Kenyan businesses continue embracing digital transformation, automating payroll has become not only a convenience but a compliance and efficiency necessity. Manual payroll processes are time-consuming, error-prone, and risky, especially with changes such as the replacement of NHIF by SHIF (Social Health Insurance Fund) under the Social Health Insurance Act, 2023.
In this blog, we’ll explore how to automate payroll in Kenya, the essential tools and APIs available, and best practices that ensure accurate and compliant payroll operations.
Why Automate Payroll?
Manual payroll involves repetitive calculations, data entry, and paperwork—all prone to human error. Automation helps your business:
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Reduce payroll processing time
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Ensure compliance with PAYE, SHIF, NSSF, and HELB
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Improve employee satisfaction through timely and accurate payments
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Maintain secure records and reporting
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Minimize penalties from statutory bodies
Key Tools for Payroll Automation in Kenya
1. FaidiHR – Built for Kenyan Payroll
FaidiHR is a Kenyan-built cloud-based HR and payroll automation platform designed to simplify salary processing and compliance.
Key Features:
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Auto-calculates PAYE, SHIF, NSSF, and HELB deductions
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Integrates with KRA iTax for streamlined tax filing
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Generates all statutory reports including P9, P10, SHIF, and NSSF
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Supports direct salary disbursement through bank-ready files
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Employee self-service portal for payslips and leave
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Tracks leave, attendance, and performance
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Maintains a secure audit trail
Why it stands out: FaidiHR is tailored for Kenyan law, easy to use, affordable, and backed by responsive local support.
2. KRA iTax Integration APIs
Kenya Revenue Authority (KRA) offers APIs to enable seamless integration between your payroll system and iTax platform.
With these APIs, you can:
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Auto-file PAYE returns
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Validate tax information in real-time
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Streamline end-of-month tax remittances
Using these APIs ensures you meet compliance deadlines and avoid late filing penalties.
3. Bank Integration Tools
Many Kenyan banks offer secure integration options for salary disbursement:
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Upload bank-ready files directly from your payroll system
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Schedule salary payments
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Reconcile payment records efficiently
Banks like KCB, Equity, and Co-operative Bank support direct uploads or secure payroll APIs.
Best Practices for Payroll Automation
To ensure a smooth transition and long-term success, consider these proven practices:
1. Choose a Localized Payroll System
A solution like FaidiHR understands Kenya's unique statutory requirements—SHIF, NSSF, PAYE, and HELB—and is regularly updated to reflect legal changes.
2. Secure Your Payroll Data
Payroll contains sensitive employee and financial data. Use systems with encryption, two-factor authentication, and role-based access.
3. Maintain Updated Employee Records
With the transition from NHIF to SHIF, it’s critical to have correct employee details for smooth registration and deduction processing.
4. Run Parallel Payrolls During Setup
Before fully switching, test the automated system alongside your manual process to verify accuracy.
5. Stay Current on Legal and Tax Updates
Partner with providers like FaidiHR who monitor and implement legal changes—such as SHIF contribution rates—into the system in real time.
Understanding SHIF (Social Health Insurance Fund)
In 2024, NHIF was officially replaced by SHIF through the Social Health Insurance Act, 2023. Employers are now mandated to:
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Register all employees under SHIF
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Deduct and remit monthly SHIF contributions
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File relevant health insurance compliance reports
FaidiHR has already integrated SHIF calculations and reporting into its payroll engine, ensuring your business stays compliant without extra manual work.
Conclusion
Automating payroll in Kenya is no longer a luxury—it’s a necessity. From managing SHIF contributions to ensuring compliance with KRA and NSSF, the right tools and practices can save you time, prevent costly errors, and improve employee trust.
FaidiHR offers an all-in-one solution for Kenyan businesses to fully automate payroll with confidence, accuracy, and legal compliance.
Get Started with FaidiHR
Make payroll effortless and compliant with FaidiHR today.
Call: +254 702 339 699
Email: sales@faidihr.com
FaidiHR – Helping Kenyan businesses focus by automating manual HR and payroll processes.