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SHA employer deduction guide Kenya 2026: full step-by-step

The full mechanics of SHA payroll deduction for Kenyan employers in 2026. Who is in scope, gross-pay definition, worked examples across tiers, deduction order, remittance channels, and record-keeping.

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by Reviewed by Michael Mwangi 11 min read Updated 12 September 2026Verified 12 Sept 2026

Who must deduct SHA

SHA is a universal employer obligation in Kenya. The Social Health Insurance Act 2023 puts the deduction duty on any employer who pays a salary or wage on Kenyan soil, regardless of employer size, sector, or the citizenship of the employee. There is no threshold below which a payroll is exempt. If you pay a house help through a formal payslip, a driver, a shop attendant, three staff at a boutique, or 800 staff at a manufacturing plant, you deduct SHA.

Public sector payrolls are included. County government payrolls are included. NGOs, faith-based organisations, embassies (for locally engaged Kenyan staff), and SACCOs run their own SHA remittances alongside PAYE, NSSF Tier I and Tier II, and the Affordable Housing Levy.

Freelancers and consultants you pay through professional invoices, without putting them on a payslip, are outside employer SHA. They pay their own contribution under Tier 2 as informal-sector members. See our companion guide SHA for the informal sector and self-employed for that route.

What counts as gross monthly pay

The 2.75% is applied to gross monthly cash pay. In practical Kenyan payroll terms, the base includes:

  • Basic salary
  • House allowance
  • Transport and travel allowances (cash)
  • Commission and sales bonuses paid in that payroll cycle
  • Overtime, shift, and acting allowances
  • Any one-off cash bonuses paid via payroll
  • Leave pay and pay in lieu of notice, in the month it is paid

The base excludes the employer share of NSSF, employer pension top-ups, non-cash benefits (car, medical scheme, staff meals) unless taxed as cash, and reimbursed expenses supported by receipts.

If your payroll software still labels this field "NHIF", update it. SHA behaves differently from NHIF on rate, cap, and PAYE ordering. Keeping the old label invites the old logic.

Worked examples across salary tiers

The rate itself is trivial arithmetic. The two things that trip payrolls up are (a) applying the floor when the 2.75% would be below KES 300 and (b) remembering there is no cap.

Gross monthly pay (KES)2.75% rawSHA deduction (KES)Notes
8,000220300Floor applied
10,909300300Break-even to the floor
25,000687.50688Rounded to nearest shilling
50,0001,3751,375Straight 2.75%
120,0003,3003,300Straight 2.75%
300,0008,2508,250No cap
800,00022,00022,000No cap

For a live per-employee check, use the SHA contribution calculator.

Deduction order on a 2026 Kenyan payslip

Since 27 December 2024, when the Tax Laws (Amendment) Act 2024 took effect, SHIF has been an allowable deduction against taxable income. That is the technical way of saying: SHIF comes off gross before PAYE is calculated. The correct order is:

  1. Gross pay
  2. Less NSSF (Tier I and Tier II, employee share)
  3. Less SHIF (2.75% of gross)
  4. Less Affordable Housing Levy (1.5% of gross)
  5. Less registered pension contributions (up to statutory cap)
  6. PAYE is computed on the remainder
  7. Less PAYE
  8. Net pay

For the full explainer on why this changed and what employees gain, see SHA deduction order vs PAYE, NSSF and Housing Levy and is SHA deducted before or after tax.

Remittance channels

SHA supports two mainstream employer remittance channels, plus bank transfer against a portal-generated reference.

Employer portal: employers.sha.go.ke

The employer portal is the recommended channel for payrolls above a handful of staff. The monthly cycle is:

  1. Log in with your employer credentials.
  2. Upload the monthly deduction schedule (CSV or the portal-generated template), listing every employee's National ID, gross pay, and computed 2.75%.
  3. Reconcile the total shown by the portal against your payroll register.
  4. Generate the payment reference.
  5. Pay by bank transfer, RTGS, or M-PESA against that exact reference. The reference is what allocates the payment to the schedule; a bare M-PESA payment without the reference will land but may not be attributed correctly.
  6. Save the portal confirmation and the M-PESA or bank receipt. Both are audit evidence.

Paybill 200222

Paybill 200222 is the same paybill that individuals use for their personal SHA contributions. For very small employers running an informal payroll (one or two staff, no HR system), some accountants send the total via 200222 and then upload the schedule separately. This works, but the audit trail is weaker than a portal-issued reference. See paybill 200222 reference.

Bank transfer

Any Kenyan commercial bank can push funds to SHA against a portal-generated payment reference. This is the norm for larger corporates, both because RTGS clears cleaner than repeated M-PESA batches and because bank-side auditability aligns with month-end reconciliation.

The monthly cycle

The monthly cycle Kenyan employers should be running from month one:

  1. Payroll cut-off (typically 25th of the current month).
  2. Compute SHIF at 2.75% of each employee's gross.
  3. Apply the floor where 2.75% is below KES 300.
  4. Post SHIF as the second statutory deduction (after NSSF, before AHL and PAYE).
  5. Run payroll and issue payslips on the payment date.
  6. Generate the SHA monthly return and upload to the employer portal.
  7. Pay SHA by the 9th of the following month. Do not wait for the 9th itself; a buffer of two to three working days handles bank or M-PESA outages.
  8. Store portal confirmation, payment receipt, and reconciled schedule in your records.

For the deadline mechanics in detail, including what happens when the 9th is a weekend or public holiday, see the 9th-of-month employer deadline.

Record-keeping

SHA can audit an employer at any point. On audit, expect requests for:

  • The monthly deduction schedule for each month in scope
  • The corresponding portal receipt or M-PESA confirmation
  • The general ledger entry that clears the SHA liability
  • Employee lists reconciled against your KRA P9 filings and NSSF returns

Retain for at least seven years, consistent with KRA record-keeping norms. See SHA employer monthly reporting for the audit-facing detail.

Edge cases the average payroll gets wrong

A handful of employee situations reliably trip up otherwise clean Kenyan payrolls in 2026. Getting these right in your first month saves months of retrospective correction.

Mid-month joiners and mid-month leavers

Employees who start on the 15th of the month owe SHIF only on what they were actually paid that month, not on a notional full-month gross. The 2.75% applies to the actual gross paid, not to an annualised figure. Same for leavers: the last month's pay is what the deduction bites.

Lump-sum bonuses

A one-off bonus paid through payroll in a given month enters the gross for that month. A KES 25,000 monthly earner who receives a KES 100,000 annual bonus in December has a December gross of KES 125,000 and pays SHIF of KES 3,438 (2.75% × 125,000) that month, not the KES 688 they normally pay. No annualisation, no smoothing.

Allowances vs reimbursements

A monthly transport allowance of KES 5,000 paid unconditionally is part of gross. A reimbursement of KES 5,000 against a taxi receipt is not. The test is whether the payment is contingent on producing a receipt for a business expense. If yes, it is not SHIF-bearing. If no, it is.

Expatriate staff on Kenyan payroll

Non-Kenyan staff working on a Kenyan payroll under a valid work permit are in scope. Deduct at the same 2.75% of gross, same floor, no cap. Where the employee has private international medical cover from a home-country employer, that does not remove the SHIF obligation. The two run in parallel.

Staff with two employers

A Kenyan employee earning at two employers pays SHIF at each. There is no netting. Employer A deducts 2.75% of Employer A gross; Employer B deducts 2.75% of Employer B gross. Both remit against the same SHA member number. On the member's side the two contributions consolidate on their SHA record; on the employer's side each pays independently.

Mistakes we still see in 2026

  • Computing SHIF on basic salary only. Wrong base. The base is gross cash remuneration.
  • Applying the old NHIF cap. There is no cap on SHA. A KES 800,000 earner pays KES 22,000, not the KES 1,700 the old NHIF band capped at.
  • Deducting SHIF after PAYE. Old order. Under the Tax Laws (Amendment) Act 2024 SHIF is before PAYE.
  • Missing the 9th. The 2% penalty per period compounds. Set the calendar reminder for the 5th.
  • Wrong National ID on the schedule. The deduction lands but is not credited to the employee. This is the archetypal "paid but inactive" complaint. See payment not reflecting.
  • Failing to register within the month the first employee joins. See adding staff to SHA.

Sources

  1. SHA premium rates (2.75%, KES 300 floor, no cap): sha.go.ke/premium-rates, accessed 26 August 2026.
  2. Tax Laws (Amendment) Act 2024, effective 27 December 2024. SHIF is an allowable deduction against taxable income (deducted before PAYE).
  3. Section 27(6), Social Health Insurance Act 2023. 2% penalty on late employer remittances.
  4. Employer portal: employers.sha.go.ke, accessed 26 August 2026.
  5. SHA toll-free helpline 0800 720 601.