SHIF, Housing Levy and NSSF Year 4 in Odoo payroll: a 2026 checklist

Kenyan payroll keeps moving. SHIF replaced NHIF, the Affordable Housing Levy now sits under its own Act, the Tax Laws (Amendment) Act, 2024 changed how PAYE treats both, and Year 4 of the NSSF phase-in took effect in February 2026.

If you run payroll in Odoo, or in any system built on salary rules, use this checklist to confirm every payslip applies the 2026 rates.

The 2026 statutory deductions at a glance

NSSF Year 4

NSSF’s notice to employers sets the Year 4 limits:

• Lower Earnings Limit: KES 9,000. Tier I is 6% of this: KES 540 from the employee and KES 540 from the employer.
• Upper Earnings Limit: KES 108,000. Tier II is 6% of earnings between KES 9,000 and KES 108,000: up to KES 5,940 each.
• Maximum per employee: KES 12,960 a month, split equally between employee and employer.

Year 3 ended on 31 January 2026. Its limits were KES 8,000 and KES 72,000, with a combined maximum of KES 8,640.

Both years charge 6% of pensionable pay up to the upper limit, so a payslip still on Year 3 values gets the total right for anyone earning up to KES 72,000. It splits that total wrongly, though: for anyone earning more than KES 8,000, Tier I is short by up to KES 60 and Tier II is over by the same amount. That matters if Tier II goes to a different scheme. Above KES 72,000 the total is short as well, by up to KES 2,160 each from employee and employer at KES 108,000 and above.

Tier I contributions go to NSSF. Tier II can go to NSSF or, with Retirement Benefits Authority approval, to an approved private pension scheme.

SHIF

The Social Health Authority sets SHIF at 2.75% of gross salary, with a minimum of KES 300 a month. SHA’s published rates set no upper limit.

Late remittance attracts a penalty of 2% of the outstanding amount for each month it stays unpaid. SHA also says employees with outstanding contributions cannot use SHIF services until the dues are settled. A late payment from your office becomes your staff’s problem at the clinic.

Affordable Housing Levy

Employer and employee each pay 1.5% of gross monthly salary. KRA collects the levy: you declare it under sheet M of the PAYE return on iTax and pay it under the “Housing Levy” sub-head by the 9th working day after the month ends. KRA’s notice sets a late-payment penalty of 3% of the unpaid amount for every month it remains unpaid.

PAYE

Since 27 December 2024, under the Tax Laws (Amendment) Act, 2024, SHIF contributions and the Affordable Housing Levy are deducted from employment income before PAYE is calculated. The old affordable housing relief no longer applies. Registered pension contributions are deductible up to KES 30,000 a month, and personal relief is KES 2,400 a month.

Treasury has proposed PAYE relief for lower earners, but it is not law. On 16 September 2026 the Treasury Cabinet Secretary said public participation would come first, in October, and the review would follow the IMF and World Bank meetings of 12 to 18 October, before a Bill goes to Parliament. Until a change is enacted, the bands KRA publishes apply.

A test payslip

Use one known case to check your rules. Take a gross salary of KES 100,000 with no other allowances, benefits or reliefs. This example treats the employee’s NSSF contribution as a deductible pension contribution.

On top of the gross salary, the employer pays KES 6,000 to NSSF and KES 1,500 in Housing Levy.

If your system gives a different answer, find out why before the next pay run. Differences of a few cents usually come from rounding rules. Larger gaps usually mean an old rate or a deduction applied in the wrong order.

Payroll in Odoo

Odoo’s Kenya payroll localisation (the l10n_ke_hr_payroll module) provides Kenyan salary rules plus P9, SHIF and NSSF reports. The SHIF and NSSF reports export to spreadsheets that can be uploaded to the SHA and NSSF portals. Whether you use the localisation or your own salary rules, run the same checks.

Checklist for 2026

1. Check the NSSF limits in your salary rules. From February 2026 they should be KES 9,000 and KES 108,000. Run test payslips and check the employee’s share:
   • KES 8,500 gross: Tier I KES 510, Tier II nil. Year 3 values would give KES 480 and KES 30.
   • KES 50,000 gross: Tier I KES 540, Tier II KES 2,460, total KES 3,000. Year 3 gives the same total, split KES 480 and KES 2,520.
   • KES 100,000 gross: total KES 6,000. Year 3 values would give KES 4,320.
2. Check the SHIF minimum. A gross salary of KES 10,000 gives KES 275 at 2.75%, so the payslip should show the KES 300 minimum.
3. Check SHIF is not capped. A KES 500,000 salary should give KES 13,750.
4. Check the Housing Levy is two lines. The employee’s 1.5% is a deduction; the employer’s 1.5% is a separate cost. Post each to the right account.
5. Check the order of deductions. NSSF, SHIF and the Housing Levy should reduce taxable pay before PAYE is worked out. The affordable housing relief should no longer appear.
6. Complete every employee record. KRA PIN, national ID, NSSF number and SHIF number. Odoo needs these to produce the NSSF and SHIF reports.
7. Flag secondary employment. Staff whose primary employer is elsewhere are taxed differently. Odoo has a secondary contract option for them.
8. Record where Tier II goes. NSSF or an approved scheme, set per employee.
9. Diarise the deadlines. PAYE, NSSF and SHIF by the 9th; the Housing Levy by the 9th working day.
10. Reconcile the liability accounts monthly. Each statutory payable should clear to zero once you pay.
11. Keep rates as dated data, not code. NSSF limits have stepped up each year under the Act’s phased schedule, and PAYE may change next. Effective-dated parameters let you update without a developer.
12. Re-test after every upgrade. Run your test payslips again after any Odoo upgrade or localisation update.

This is general information, not legal, tax or payroll advice. Confirm rates with KRA, NSSF and SHA whenever anything changes.

Getting it right in Odoo

Statutory payroll is unforgiving: an error repeats on every payslip until someone notices, and late-payment penalties grow every month. A one-off check of your salary rules against the 2026 rates costs far less than unwinding months of wrong deductions.

We implement and support Odoo for Kenyan businesses, including statutory payroll and the monthly reports that go with it. If you want your salary rules checked before the next pay run, start with our Odoo ERP service.