How to hire employees in Kenya: contracts, payroll and statutory deductions

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To hire employees in Kenya you need a written contract that meets the Employment Act, registration with the Kenya Revenue Authority and the statutory funds, and a monthly payroll that deducts PAYE, SHIF, the Affordable Housing Levy and NSSF. Foreign companies can do this through their own Kenyan entity or through an employer of record. This guide covers the options, contracts, payroll and deductions, leave, ending employment and the practical steps, with sources for the rules.

Why companies hire in Kenya

Kenya has a large, English-speaking, well-educated workforce, a strong technology scene centred on Nairobi, widespread mobile money and good time zone overlap with Europe and the Middle East. Many companies hire developers, customer support, finance and operations staff there, either to serve East Africa or as part of a remote team.

Employment is regulated mainly by the Employment Act, 2007 and related laws, and tax and contributions are administered through the Kenya Revenue Authority (KRA) and statutory funds. The rules are clear but change from time to time, especially rates and thresholds, so check current figures before each payroll year.

Your three options

• Set up a Kenyan company (or register a branch of your foreign company), register as an employer and run local payroll. Best for larger, long-term teams.
• Use an employer of record, which employs the person on your behalf through its Kenyan entity. Best for a first hire or small team. See what an employer of record is.
• Engage an independent contractor, suitable only if the person genuinely runs their own business. Full-time workers under your direction are likely to be employees under Kenyan law; see contractor misclassification.

Employment contracts in Kenya

The Employment Act requires a written contract for employment lasting, or expected to last, three months or more. The contract should state the essential terms, including:

• Names of the employer and employee, job title and description.
• Start date and, for fixed-term contracts, the end date.
• Place of work and working hours.
• Remuneration, how it is calculated and paid, and any benefits.
• Annual leave and other leave.
• Probation period, if any.
• Notice period.

An EOR provides a compliant template; if you employ directly, have a Kenyan employment lawyer review your contract once and reuse it.

Probation and notice

The Employment Act allows a probationary contract of up to six months, which can be extended by up to a further six months with the employee's agreement. During probation, either side may end the contract with seven days' notice, unless the contract provides otherwise.

After probation, minimum notice depends on how often wages are paid; for employees paid monthly, the minimum is generally 28 days. Contracts can provide longer notice. Payment in lieu of notice is generally allowed.

Working hours, leave and holidays

Kenyan law provides several types of leave. Key ones:

• Annual leave: at least 21 working days with full pay after every twelve consecutive months of service.
• Maternity leave: three months with full pay.
• Paternity leave: two weeks with full pay.
• Sick leave: after two months of service, seven days with full pay and seven days with half pay in each twelve months, with a medical certificate.
• Public holidays as gazetted by the government.

Employees are also entitled to at least one rest day in every seven. Many employers offer more generous leave to compete for talent.

Minimum wage

Kenya sets minimum wages by regulation, with different rates for different occupations and locations, and separate rules for agricultural workers. Professional roles such as software development are usually paid well above the minimum, but you should check the current wage orders for roles such as cleaners, drivers or general workers. Rates are reviewed periodically.

Registering as an employer

If you employ directly through a Kenyan entity, you need:

• A KRA PIN for the company and registration for PAYE obligations on iTax.
• Registration with the National Social Security Fund (NSSF).
• Registration with the Social Health Authority for SHIF contributions.
• Arrangements to remit the Affordable Housing Levy.
• NITA registration for the industrial training levy.

Each employee needs a KRA PIN and their NSSF and SHA numbers. An EOR handles all of this for you.

PAYE: income tax on salaries

Employers withhold PAYE from employees' pay each month using graduated bands. On monthly taxable pay, current bands are: 10% on the first KES 24,000, 25% on the next amount up to KES 32,333, 30% up to KES 500,000, 32.5% up to KES 800,000, and 35% above that. A personal relief of KES 2,400 a month reduces the tax payable.

Since December 2024, SHIF, the Affordable Housing Levy and NSSF contributions are deducted before PAYE is calculated, which lowers taxable pay. Our Kenya PAYE calculator works through the full calculation, and PAYE in Kenya explains it step by step.

SHIF, Housing Levy and NSSF

• Social Health Insurance Fund (SHIF): 2.75% of gross salary, deducted from the employee, with a minimum monthly amount of KES 300.
• Affordable Housing Levy: 1.5% of gross salary from the employee, matched by 1.5% from the employer.
• NSSF: 6% from the employee and 6% from the employer on pensionable pay up to the current upper earnings limit, which is KES 108,000 from February 2026.
• NITA levy: paid by the employer, KES 50 per employee per month.

Details and worked examples are in statutory deductions in Kenya. Rates change through new laws and phased schedules, so check before each year.

What an employee costs in Kenya

Employer costs in Kenya are moderate compared with many countries. On top of gross salary, an employer pays its NSSF share up to the cap, its 1.5% Housing Levy share and the NITA levy, plus any benefits it chooses to provide, such as private medical cover, which many professional employers offer.

Through an EOR, add the provider's monthly fee. Estimate the total with our EOR cost calculator, and compare providers in the EOR ranking. Current entry prices: Deel From USD 599 per employee per month, Remote From USD 699 per employee per month, Oyster From USD 699 per employee per month.

Running payroll in Kenya

If you employ directly, monthly payroll means calculating gross pay, deducting SHIF, the Housing Levy and NSSF, calculating PAYE, paying net salaries, issuing payslips, and remitting deductions and employer shares by the statutory deadlines, generally by the ninth of the following month for PAYE and the Housing Levy. Late payment attracts penalties and interest.

Local payroll software automates the calculations and filings. Compare options in our Kenya payroll software ranking and the wider Kenya payroll software guide. Many businesses pair payroll with accounting software that supports eTIMS invoicing; see how to register for eTIMS.

Paying salaries

Salaries are usually paid monthly by bank transfer, and mobile money such as M-Pesa is widely used for smaller payments and some salaries. Pay in Kenyan shillings unless the contract specifies otherwise. If your company is abroad and you use an EOR, you pay the EOR, which pays the employee locally. If you run your own entity, fund the local account in time for payday, allowing for international transfer times; see how to cut international payment fees.

Ending employment

Kenyan law requires a valid reason and a fair procedure for terminating employment. For misconduct or poor performance, the employee should be told the reasons and given a chance to respond, with a colleague present if they wish. Unfair termination can lead to claims at the Employment and Labour Relations Court.

Redundancy has its own procedure, including notice to the employee and the labour officer, fair selection criteria, and severance pay of at least 15 days' pay for each completed year of service. On any termination, the employer must pay outstanding wages, accrued leave and notice, and issue a certificate of service. An EOR manages this process, but you should involve them early.

Work permits for foreign nationals

Non-Kenyan employees need a work permit, usually a Class D permit for employment, issued by the Department of Immigration. Employers generally need to show why the role cannot be filled locally. Permits take time and cost money, and EORs may or may not offer support. For most roles, hiring Kenyan citizens or residents is simpler.

Data protection

Kenya's Data Protection Act, 2019 governs how you collect and use employees' personal data, such as ID numbers, bank details and health information. Employers processing personal data above certain thresholds must register with the Office of the Data Protection Commissioner. Collect only what you need, keep it secure, and explain to employees how it is used. Payroll providers and EORs should have clear data processing terms.

Hiring developers and remote staff in Kenya

Kenya is a popular place to hire software developers and remote staff. Recruit through local job boards, developer communities and specialist platforms; compare options in our talent platforms ranking and see how to hire remote developers. When setting salaries, research local market rates for the seniority you need; very low offers attract poor results and high turnover.

A step-by-step hiring checklist

1. Decide whether the person is an employee or a genuine contractor.
2. Choose an employer of record or your own entity.
3. Agree salary, benefits and start date, checking the total cost.
4. Issue a written contract that meets the Employment Act.
5. Collect the employee's KRA PIN, ID, NSSF and SHA details and bank details.
6. Set up payroll with correct deductions.
7. Pay salary and remit deductions on time each month.
8. Track leave and keep records.

Common mistakes

• Treating full-time team members as contractors.
• Using old deduction rates, such as the pre-2024 NHIF system or old NSSF limits.
• Calculating PAYE before deducting SHIF, the Housing Levy and NSSF.
• Missing remittance deadlines.
• Terminating without a fair process.
• Forgetting the Housing Levy employer share and NITA levy in cost estimates.

Example: a monthly payslip in Kenya

To see how the pieces fit, consider an employee on a gross salary of KES 150,000 a month with no other benefits. The payroll works in this order:

1. SHIF at 2.75% of gross: KES 4,125.
2. Affordable Housing Levy at 1.5% of gross: KES 2,250.
3. NSSF at 6% of pensionable pay up to KES 108,000: KES 6,480.
4. Taxable pay is gross pay less those three deductions: KES 137,145.
5. PAYE is calculated on taxable pay using the monthly bands, then the KES 2,400 personal relief is subtracted.
6. Net pay is gross pay less SHIF, the Housing Levy, NSSF and PAYE.

On top of the gross salary, the employer pays its own NSSF share (KES 6,480 here), its 1.5% Housing Levy share (KES 2,250) and the KES 50 NITA levy. Run the exact numbers in the Kenya PAYE calculator, which shows each line.

Benefits Kenyan candidates expect

For professional roles, statutory benefits alone are rarely enough. Common additions include private medical cover for the employee and often their family, since many people supplement SHIF with private insurance; a pension top-up above NSSF; an internet or airtime allowance for remote staff; and learning budgets. Some employers also offer a thirteenth-month bonus or performance bonus, though neither is required by law. Ask candidates what their current package includes so your offer compares fairly.

Questions