Taking on your first employee is a big step. It brings help, but also obligations: a contract, statutory deductions and monthly filings. Setting them up properly at the start is much easier than fixing them later.

Before you hire

  • Define the job in writing: duties, hours, pay, place of work and who the employee reports to.
  • Check you can afford it. The cost is more than salary: add the employer's NSSF and Housing Levy contributions. The staff cost and headcount budget planner adds them for each hire.
  • Check the minimum wage for the job and the area; see how to check the minimum wage.

The contract

Give the employee a written contract that covers pay, hours, leave, notice, probation and how the contract can end. The Employment Act requires certain terms to be in writing. A probation period of up to six months is common and can be extended once with the employee's consent. Keep a signed copy, and record the key dates in the probation and contract expiry tracker.

Registrations

  1. PAYE. Your business needs the PAYE obligation on iTax; see how to register on iTax.
  2. NSSF. Register as an employer and enrol the employee.
  3. SHIF. Register with the Social Health Authority.
  4. Affordable Housing Levy. Register to pay the levy on iTax.

Collect the employee's KRA PIN, national ID, NSSF and SHIF details and bank or M-Pesa number on the first day; the new employee onboarding checklist lists everything.

Calculating pay

For each month work out the employee's gross pay, NSSF at 6%, SHIF at 2.75%, the Housing Levy at 1.5% and PAYE. The PAYE calculator does it for one person, and the monthly payroll workbook for many. Understand each deduction in NSSF contributions explained, SHIF contributions explained and the Affordable Housing Levy explained.

Paying and filing

Pay the net salary on the agreed date and give a payslip; the free payslip generator workbook produces one. Pay PAYE, NSSF, SHIF and the Housing Levy by the 9th of the following month and file the return. See how to run payroll for a small business for the monthly routine and the KRA filing calendar for dates.

Records to keep

Keep the contract, the ID and PIN, payslips, proof of every remittance, leave records and the P9 at year end; see filing your employment return with a P9. The employee records register and contract tracker holds the key details, and the annual leave planner tracks leave.

Treat casual and part-time workers properly too

Casual workers are employees too, and their pay and deductions need records. The free weekly casual wages sheet helps.

Common first-time mistakes

  1. No written contract.
  2. Forgetting to register for NSSF and SHIF.
  3. Deducting but not paying over statutory amounts; see KRA penalties and interest explained.
  4. Paying below the minimum wage.

Where to go next

Once the first hire is working, the next steps are keeping records and budgeting. Read budgeting for a small business to add wages and statutory costs to your plan, and how to run payroll for a small business in Kenya for the monthly routine. The free sick leave and absence tracker is useful from the first month.

Employment law is detailed. Confirm your obligations with the labour office or an advocate.

Common questions

Do I need a written contract? For employment lasting more than three months, the Employment Act requires written terms. Even for shorter jobs, a written agreement prevents disputes.

Which registrations must I complete? Add PAYE on iTax, register the employee with NSSF and SHA, and be ready for the Affordable Housing Levy and NITA. The employee needs a KRA PIN.

What does an employee really cost? The gross salary plus the employer's share of NSSF and the housing levy, NITA, work injury insurance and any benefits. Budget for these before you make an offer.