Running payroll for the first time can feel like a lot: four statutory deductions, several deadlines and a payslip for each person. In practice it is a monthly routine of seven steps. Once your records are set up, each month takes less than an hour for a small team.

1. Set up your employee records

Keep one record per employee with their full name, KRA PIN, national ID, NSSF number, SHIF number, start date, job title, pay and bank or M-Pesa details. A written contract should state pay, hours and leave. The employee records register and contract tracker is a free place to keep all of this, including contract end dates.

2. Register as an employer

Your business needs a KRA PIN with the PAYE obligation switched on, an NSSF employer number and registration for SHIF and the Housing Levy. If you do not have a PIN yet, read how to get a KRA PIN and how to register on iTax.

3. Collect the month's pay information

Gather basic pay, allowances, overtime, bonuses and any unpaid leave for the month. Overtime is paid at 1.5 times the hourly rate on normal days and double on rest days and holidays; the overtime pay calculator does the sum, and the free overtime and leave tracker keeps the hours.

4. Calculate the deductions

For each employee work out:

  • NSSF at 6% of pensionable pay (employee and employer)
  • SHIF at 2.75% of gross pay
  • Housing Levy at 1.5% (employee and employer)
  • PAYE on taxable pay, less personal relief

You can do these one at a time with the PAYE calculator, or let the monthly payroll workbook calculate everybody at once for up to 50 employees. How PAYE is worked out is explained in our step-by-step guide.

5. Issue payslips

Every employee should receive a payslip showing gross pay, each deduction and net pay. The payslip generator workbook produces a printable payslip, and the online payslip generator creates a PDF.

6. Pay your staff and remit the deductions

Pay net salaries on the agreed day. Then pay PAYE, NSSF, SHIF and the Housing Levy over to the authorities, normally by the 9th of the following month. Late payment attracts penalties and interest; see KRA penalties and interest explained. The statutory remittance tracker shows what is due, when you paid and what is still outstanding.

7. File returns and keep records

PAYE is declared monthly through iTax. At year end you give each employee a P9, and the business files its employment returns; see filing your employment return with a P9. Keep payroll records for at least five years.

Mistakes to avoid

  • Forgetting the employer's share of NSSF and the Housing Levy when you budget. Use the staff cost and headcount budget planner.
  • Using last year's NSSF limits or tax bands. Rates change, so check them every February and July.
  • Paying casual workers in cash with no record. Even daily-rate workers should be recorded; the weekly casual wages sheet is free.

When to use software

A spreadsheet is fine for a small team. Once you pass about 50 people, or you need approvals and bank file uploads, a dedicated payroll system saves time. Until then, the templates above give you a solid, auditable routine.

This is general guidance. Confirm current rules and due dates with KRA, NSSF and the Social Health Authority.

Common questions

When must payroll taxes be paid? PAYE and the Affordable Housing Levy are due by the 9th of the month after payment, SHIF by the 9th and NSSF by the 15th. Pay on the working day before if the date is a weekend or holiday.

Do I need payroll software? A spreadsheet is enough for a few employees if it is checked carefully, but software reduces errors and files returns faster as the team grows. Whatever you use, test it against a calculator.

What records must I keep? Contracts, payslips, timesheets, P9 forms, remittance receipts and the monthly returns, for at least five years.