Under Kenya’s employment laws, an employer cannot deduct more than two-thirds of an employee's basic pay in a single month.
As Kenyans mark this year’s Labour Day, concerns are growing majority of salaried workers are taking home less than a third of their net salaries due to new statutory deductions in contravention of local and international labour laws.
Under Kenya’s employment laws, an employer cannot deduct more than two-thirds of an employee's basic pay in a single month, a rule designed to protect employees by ensuring they have sufficient income for basic needs after deductions to support a decent living.
But since 2023, this rule has been discarded by the Kenyan parliament that has passed laws imposing new deductions and which have been ratified by President William Ruto, including the Housing Levy, Social Health Insurance Fund (SHIF) contributions and now the revised National Social Security Fund (NSSF) rates.
Among the most recent changes to the law is the doubling of NSSF contributions for workers earning above Sh36,000, set to increase from Sh2,160 to Sh4,320 with effect from last month.
The rising deductions are set to plunge even more salaried workers to taking home meagre pay. A report of the auditor general for the year ended June 2024 said the number of county government employees taking home less than a third of their gross pay more than doubled to 21, 647 up from 8, 514. And in 2023, the Public Service Commission lamented out of 300, 000 public officers, 82, 577 were taking home below a third of their pay.
Labour experts are warning that the continued decline of the payslip is in breach of the International Labour Organization's (ILO) conventions, which Kenya is a signatory.
The Housing Levy tax was introduced two years ago. It requires every employer to contribute 1.5 percent of an employee's monthly gross salary to the levy.
Employees contribute another 1.5 percent of their monthly gross salary, instead of their basic pay, to make up the 3 percent.
The enactment of the Finance Acts since 2023 have in effect condemned the Kenyan worker’s payslip to multiple deductions that have made Kenyans lose their disposable income rendering them unable to pay for basic needs.
Labour Day commemorations
Some politicians have poured cold water on Labour Day commemorations saying it doesn’t matter how long or how much we debate over a better payslip so long as the government is unwilling to listen to workers cry.
“There is no respite for the Kenyan worker unless we change the current regime. Nobody is listening to the workers' cry and it doesn’t matter how much noise you make,” said Saboti MP Caleb Hamisi.
“We have come up with a policy of 'Okoa Your Payslip' because Kenyans are paying nearly fifty percent of what they earn to William Ruto,” said Wiper leader Mr Kalonzo Musyoka.
Former Deputy President Rigathi Gachagua has continued his onslaught on Ruto’s administration, expressing his concern over the increased tax deductions set to affect many workers, likely referencing the Tax Amendment Act and the Tax Procedures Act which took effect on December 27, 2024.
“We want to restore the dignity of the payslip so that the people are able to do their things,” said Mr Gachagua in a recent interview.
Even a proposal by the National Assembly to consider revising or even scrapping the one-third salary rule does not translate into a stable payslip without the removal of the deductions imposed on the Kenyan payslip by Parliament.
“The issue is that most workers are on the verge of taking home less than ⅓ of their net salaries. This is occasioned by the many taxes the government has imposed since 2023,” said the Federation of Kenya Employers through the chief executive Ms Jacqueline Mugo in a statement.
FKE chief executive officer Jacqueline Mugo.
“Enterprises continue to bear the burden of these additional taxes with invariable imminent redundancies to keep the businesses afloat. FKE through its memo on the Finance Bill in 2023 opposed these taxes, some of which were pegged on gross salary,” the statement added.
The legal framework for deductions is outlined in Kenya's Employment Act, specifically Section 19(3) of the Employment Act 2007.
The ILO Protection of Wages Convention (No. 95), which Kenya has ratified, outlines that wage deductions can only be made according to national laws, regulations, or collective agreements.
Both the Kenyan labour laws and the ILO conventions, which Kenya is a signatory, provide salary and wage deductions limits.
This limit ensures that employees retain a reasonable portion of their earnings for essential needs.
“Kenya risks being admonished in the ILO Conference plenary if the issue is raised substantively,” FKE said.
But the Cabinet Secretary for Labour Dr Alfred Mutua is opposed to the assertion that Kenya is in contravention of both the Employment Act and the ILO convention, stating that statutory deductions are not the only responsible factors that have affected the payslip negatively.
“From what you have shared with me, when we pass government laws that these are the deductions, then that is what is deducted,” said Dr Mutua.
Dr Mutua exonerated the government from blame saying some workers’ personal loans could be the reason for their shrinking incomes.
Income tax
“Do you know what the income tax is in Norway? If you look at Norway, just for comparable purposes, the income tax in Norway is 22 percent. When you look at the entire Scandinavian countries, the entire collection they do is about 45 percent,” said Dr Mutua.
But while it is every employer’s legal duty to deduct income tax from employee pay, President Ruto’s government has discarded the local practice which permits deductions from the basic salary.
Instead the government deducts gross pay hurting the majority of workers who contribute to the country’s income tax, a move the workers’ umbrella body said it would petition the President on Labour Day.
“NSSF is workers' savings and should not be viewed as a tax,” said Mr Francis Atwoli, secretary general of the Central Organization of Trade Unions- Cotu (K).
Central Organisation of Trade Unions Kenya Secretary General Francis Atwoli during a media briefing at Solidarity House on March 28, 2025.
“COTU (K) has petitioned the president to institute further reforms to ensure that the PAYE is based on the basic salary and not the gross salary. On Labour Day we shall be reminding the president our request to ensure that PAYE is based on basic salary and not the gross,” Mr Atwoli said.
Employers who are locked out from crucial employers’ boards due to their stand on the recently introduced statutory deductions such as Housing Levy and Social Health Insurance Fund (SHIF) say the requirements were rushed and without the employers input.
“During public participation on the Finance Bill 2023 & 2024, FKE made it clear to the government that it should not deduct pay beyond the statutory limit. FKE went to court to challenge the NHIF Act of 2022 the effect of which was to increase NHIF rates with the employer required to match,” said Ms Mugo.
“The government purported to engage with us, but instead legislated the SHIF Act and 3 other pieces of legislation related to it. The new NHIF Act died a natural death and for FKE's role in agitating for the punitive rates, we were kicked out of the board of SHIF,” Ms Mugo explained.
According to the employers, some of the statutory deductions should be reviewed.
“Housing Levy is a needless tax. Affordable housing initiative was there even without the Housing Levy. Introducing the levy just needlessly raided the payslip. If the take-home is more, why aren't workers a happy lot?” FKE posed.
According to the ILO, these deductions must be clearly communicated to workers in advance, ensuring they are aware of the basis and extent of any potential deductions.
However, instead of reducing the deductions, a parliamentary committee is now calling for removal or a review of the Act that criminalises deductions beyond two-thirds of an employee's pay to align with the increased deductions.
Multiple tax deductions
The National Assembly’s Public Accounts Committee (PAC) attributes the deductions to Housing Levy, SHIF contributions, and the revised NSSF rates.
Committee chairperson and Butere MP, Tindi Mwale, expressed concern over the growing number of government departments flouting the regulation, which is intended to protect workers from being left without adequate income after deductions.
“The law is no longer practical due to multiple tax deductions that have eroded workers’ earnings,” Mr Mwale stated.
But employers argue that even this proposal should not be on the table in the first place.
“We not aware that parliamentarians are planning to do that. It would be very sad if the law is amended to remove the cap on the a ⅓ rule. No right thinking Kenyan should support such legislative frolics,” said FKE in a statement.
“This will not only lead to further impoverishment of the Kenyan worker, it will demotivate them, the level productivity will spiral downwards, we'll become uncompetitive in the regional and global market as there is likely to be massive capital flight, brain drain, enterprises shutting down, social and industrial unrest.”
Meanwhile, the Kenyan worker is up in arms and some are opposed to the Housing Levy tax that does not automatically guarantee them the ownership of a house.
“We are heavily taxed. What I used to get is no longer there and since Ruto came into office, I have been suffering,” said Ms Wanjiru, a civil servant who did not wish her identity disclosed. “What is the use of taxing for a house when I cannot own it in the first place?”
Ms Wanjiru works as a clerk in the Ministry of Agriculture and earns a basic pay of Sh28,000.
From her pay, the government deducts Sh1,086.50 for SHIF, Housing Levy (Sh600), PAYE (Sh3,624) and NSSF (Sh360).
Other deductions include Sh300 benevolent; and loans amounting to Sh14,000 per month.
Ms Wanjiku takes home Sh10,000 per month from a basic pay of Sh28,000.
Another Kenyan, Wilberforce earns Sh75,000 per month. SHIF deduction is Sh 2,062, Housing Levy (Sh1,125), Benevolent Fund (Sh200), PAYE (Sh6,000) and NSSF (Sh4,000). If other taxes and deductions including personal loans are included, he takes home less than 50,000 per month.
