Kenyans feel the pinch as SHIF & Housing Levy Taxes are Increased

Kenyans are feeling the pinch as new statutory deductions bite into their earnings, leaving many with significantly reduced disposable incomes. The introduction of the 2.75% Social Health Insurance Fund (SHIF) deduction on gross salary, coupled with a 1.5% housing levy, has caused a ripple effect across households and the economy.

For instance, employees earning between KSh 100,000 and KSh 1 million are now losing between KSh 27,665 and KSh 351,282 to taxes—an increase from the previous KSh 25,115 and KSh 310,482, as reported by Business Daily. This sharp rise has left formal-sector workers—about 3.3 million—shouldering a heavier financial burden, especially compared to their counterparts in the informal sector, which makes up a majority of the workforce.

The new deductions mean that for some, up to 45% of their earnings are now being funneled into statutory obligations. The result? A weakened household purchasing power at a time when economic challenges are already high. Families are forced to stretch their budgets further, limiting spending on essential and non-essential goods and services.

While these contributions aim to fund critical initiatives like healthcare and housing, the immediate impact on workers' wallets raises questions about affordability and timing. For many, these deductions come at a time when the cost of living is already soaring, leaving little room for financial maneuverability.

As Kenyans adapt to these changes, efficient financial planning and cost-saving measures will become even more essential in navigating these tough economic times. 

Curious how these deductions impact your paycheck? Use  FaidiHR’s Netpay Calculator  to see your take-home pay instantly!