Managing payroll in Uganda requires more than just calculating salaries — it involves strict compliance with statutory deductions as defined by national laws. Whether you're a startup, SME, or large organization, understanding Uganda’s payroll obligations is key to avoiding penalties, ensuring employee satisfaction, and maintaining a solid employer reputation.
This blog outlines the mandatory payroll deductions in Uganda, who is responsible for remitting them, and how automation through tools like FaidiHR can help streamline compliance.
Why Statutory Deductions Matter
Statutory deductions are legally required amounts withheld from an employee’s gross salary and remitted to government agencies. These funds contribute to national programs such as retirement benefits, income tax, and social security.
Failure to correctly deduct or remit these payments can lead to:
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Penalties and interest charges
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Legal action from authorities
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Loss of employee trust
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Business disruptions during audits
Key Statutory Payroll Deductions in Uganda (2025)
1. Pay As You Earn (PAYE) – Income Tax
Who pays it?
Deducted from the employee’s salary.
Who remits it?
The employer must calculate, deduct, and remit PAYE to the Uganda Revenue Authority (URA) by the 15th of the following month.
How is it calculated?
PAYE is computed based on progressive tax bands set by URA. As of 2025, the brackets typically apply as follows:
| Monthly Income (UGX) | PAYE Rate |
|---|---|
| 0 – 235,000 | 0% |
| 235,001 – 335,000 | 10% |
| 335,001 – 410,000 | 20% |
| 410,001+ | 30% |
Employers must also account for local service tax where applicable.
2. National Social Security Fund (NSSF) – Retirement Savings
Who pays it?
Both employer and employee contribute.
How much?
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Employer: 10% of the employee’s gross monthly salary
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Employee: 5% (deducted from salary)
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Total Contribution: 15%
Who remits it?
The employer is responsible for remitting the combined 15% to NSSF Uganda by the 15th of the following month.
3. Local Service Tax (LST)
Who pays it?
The employee.
How is it handled?
Some local governments require employees to pay Local Service Tax, which employers must deduct and remit to the appropriate local authority.
It is an annual tax often collected in four installments (quarterly) based on employee salary ranges.
4. Other Possible Deductions
Depending on your workforce and contracts, additional deductions may include:
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Loan repayments (e.g., employer-issued or SACCO loans)
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Advance salary deductions
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Voluntary pension schemes or insurance premiums
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Union fees (for unionized employees)
Payroll Compliance Tips for Ugandan Employers
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Register with URA and NSSF if you haven’t already
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Deduct and remit accurately and on time to avoid penalties
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Provide payslips showing gross salary, deductions, and net pay
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Maintain payroll records for at least 5 years as per the URA Act
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Use compliant payroll software that auto-calculates statutory deductions and generates required reports
Automate Statutory Deductions with FaidiHR
FaidiHR is now available in Uganda — built to help employers automate payroll, stay compliant, and avoid the stress of manual processing.
FaidiHR handles:
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PAYE calculations based on URA tax brackets
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NSSF employer/employee deductions
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Payroll schedules and reminders
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Payslip generation
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Employee data and document management
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Secure reporting and audit trails
Whether you're managing a team of 5 or 500, FaidiHR ensures your payroll processes are accurate, secure, and compliant with Ugandan law.
Ready to Automate Payroll in Uganda?
Call: +254 702 339 699
Email: sales@faidihr.com
FaidiHR – Powering Payroll and HR Compliance in East Africa.