A job offer quotes a gross salary, but what you spend is the net pay that reaches your account. The path from one to the other follows a fixed sequence of deductions. Once you know the order, you can check your payslip, compare offers and plan a budget. This guide gives the method in six steps, with a worked example, and points to calculators that do the sums for you.

The sequence

  1. Start with gross pay: basic salary plus taxable allowances and benefits.
  2. Deduct NSSF, SHIF and the Affordable Housing Levy to reach taxable pay.
  3. Apply the PAYE bands to taxable pay.
  4. Subtract personal relief and any insurance relief.
  5. The result is the PAYE payable.
  6. Net pay = gross pay less NSSF, SHIF, housing levy and PAYE, and any other deductions such as loans or Sacco.

Step 1: gross pay

Add the basic salary and cash allowances, such as housing, transport or commission. Non-cash benefits, such as a company car, are valued under the rules and added too: company car and housing benefits and taxable allowances and company benefits. Reimbursements of genuine business expenses are not income.

Step 2: statutory deductions

All three are deducted before PAYE: housing levy and SHIF now deductible before PAYE.

Step 3: taxable pay

Taxable pay = gross pay less NSSF, SHIF and housing levy (and any pension contribution within the limit, and other allowed deductions, such as mortgage interest, if your employer processes them: mortgage interest relief).

Step 4: PAYE bands

PAYE is charged in slices. The first slice is taxed at the lowest rate, the next slice at a higher rate, and so on up to the top rate. The bands are held in the rates table and can change with Finance Acts. Explore how they apply in how PAYE is calculated in Kenya.

Step 5: reliefs

Subtract personal relief of KES 2,400 a month and any insurance relief: personal relief and other tax reliefs. Relief cannot make PAYE negative.

Step 6: net pay

Deduct NSSF, SHIF, levy and PAYE from gross pay. Subtract voluntary items like Sacco deposits and loan repayments.

Worked example

Gross pay is KES 100,000 a month. For illustration, suppose NSSF is KES 6,000, SHIF is 2.75 percent of gross (KES 2,750) and the housing levy is 1.5 percent (KES 1,500).

Item Amount (KES)
Gross pay 100,000
Less NSSF 6,000
Less SHIF 2,750
Less housing levy 1,500
Taxable pay 89,750

Apply the PAYE bands to KES 89,750: the first slice at 10 percent, the next at 25 percent, and the remainder at 30 percent. Subtract personal relief. The remaining tax is the PAYE. Net pay is KES 100,000 less KES 10,250 of statutory deductions less PAYE. Enter the same figures in the PAYE calculator to see the exact result line by line; use the date box to check any month.

Working backwards

Employers often agree a net figure and need the gross. The net to gross salary calculator does it by searching for the gross pay that produces the net you want. This matters in negotiations: gross pay vs net pay: negotiating a salary.

Check your payslip

Put your payslip next to the calculation and compare each line. If PAYE is higher than the calculator shows, a relief may be missing, or a benefit may be overvalued. See how to spot mistakes on your payslip and read your payslip line by line. Employers can produce correct payslips with the payslip generator and the gross-to-net salary table.

Bonuses and overtime

Bonuses and overtime are added to gross pay in the month paid, so the extra income is taxed at your top marginal rate. See tax on bonuses and commissions and overtime pay rules and tax.

Plan with your net pay

Use net pay to build a budget: how to budget on a Kenyan salary.

Frequently asked questions

Why is my net pay lower than expected? Usually because NSSF, SHIF, housing levy and PAYE together take a large share, and loan or Sacco deductions come after tax.

Does a higher gross always mean higher net? Yes, but not proportionally. Each extra shilling is taxed at your top PAYE rate and bears contributions.

Are allowances taxed? Cash allowances are part of gross pay and taxed. Some, like a per diem for travel, are exempt up to a limit.

Does the housing levy reduce my PAYE? Yes, because it is deducted before PAYE is computed.