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January 31, 2024

Kenya makes several changes to employment-related contributions

  • Employers have no legal obligation to deduct and remit the affordable housing levy following a recent ruling by the Court of Appeal.
  • The implementation of the Social Health Insurance Fund is pending the finalization and gazettement of the Social Health Insurance (General) Regulations.
  • Effective February 2024, employers should remit National Social Security Fund contributions in line with the revised contributions schedule.

Executive summary

Several recent developments in Kenya will be of interest to employers. Based on a 26 January decision by the Kenya Court of Appeal, employers currently have no legal obligation to deduct or remit the Affordable Housing Levy. A 19 January decision by the Court of Appeal paves the way for the Government of Kenya to proceed with the rollout of the Universal Health Care (UHC) laws. And, effective February 2024, employers will need to contributions to the National Social Security Fund (NSSF) based on a revised (increased) contributions schedule.

Affordable Housing Levy

The Kenya Revenue Authority (KRA) commenced the collection of the Affordable Housing Levy (AHL) from salaried workers starting 1 July 2023. This levy, set at 1.5% of the worker's gross monthly salary, is matched by the employer.

However, the High Court of Kenya declared housing levy unconstitutional in November 2023, citing the lack of a comprehensive legal framework in violation of the Constitution. In response, the Government of Kenya filed an appeal at the Court of Appeal seeking order to continue collecting the levy as the matters highlighted by the High Court are rectified through appropriate legal avenues.

On 4 January 2024 the Court of Appeal granted the government permission to continue collecting the levy while deliberating whether to uphold or extend the order. The Court of Appeal on 26 January 2024 rejected the Government's request to continue collecting the levy until the hearing and determination of the substantive appeal.

This meant that the decision of the High Court of Kenya on the unconstitutionality of the levy stands, pending the determination of the substantive appeal by the Government. As a direct result of this decision, employers have no legal obligation to deduct or remit the levy.

Taxpayers should continue monitoring developments owing to the ongoing debate on the Affordable Housing Bill and the hearing of the substantive appeal on the matter.

Social Health Insurance Fund

On 27 November 2023, the High Court of Kenya issued conservatory orders halting the implementation of the Social Health Insurance Fund (SHIF). This was followed by application for a stay of the order by the Government of Kenya.

On 19 January 2024, the Court of Appeal lifted the order paving way for the government to proceed with the rollout of the UHC laws.

SHIF is designed to replace National Health Insurance Fund (NHIF) and establish three new separate funds: the Primary Healthcare Fund, the Social Health Insurance Fund, and the Emergency, Chronic, and Critical Illness Fund.

As outlined in the draft Social Health Insurance (General) Regulations, the contributions shall be as follows:

  • Households deriving income from salaried employment are required to make a monthly statutory deduction contribution to the Social Health Insurance Fund, equivalent to 2.75% of the gross salary or wage, by the ninth day of each month.
  • Households with income not from salaried employment must pay an annual contribution to the SHIF, calculated at 2.75% of the proportion of household income determined by the Ministry of Health through means testing.
  • The monthly payment shall not be less than 300 Kenyan shillings (KES 300) in the event 2.75% of the household's income is lower than KES 300.

Every person resident in Kenya shall be required to apply to the Social Health Authority for registration as a member of the SHIF within 90 days of the regulations coming into force.

According to the Ministry of Health, the public registration process for joining the fund is set to commence in March 2024, followed by the actual implementation of the funds.

Employers should continue deducting and remitting contributions as per the previous NHIF regulations pending the gazettement and implementation of SHIF regulations.

National Social Security Fund

The NSSF recently issued a notice to employers detailing adjustments being made in the second year of implementation of the revised Tier 1 and Tier 2 NSSF contributions.

Effective February 2024, the Lower Earnings limit will increase from KES 6,000 to KES 7,000. Simultaneously, the Upper Earnings limit will increase from KES 18,000 to KES 36,000.

Under the revised NSSF contributions, a total of 12% of the pensionable income will be remitted to NSSF, with the employer and employee making equal contributions. Effectively, the upper ceiling has been revised from KES 1,080 to KES 2,160 for both the employee and the employer.

The contribution rates are set out in the table below:


Amount (KES)

Lower limit (Tier 1)


Total contribution by employee


Total contribution by employer


Total Tier 1 NSSF contributions


Upper limit (Tier 2)


Contribution on upper limit (6% of upper limit less lower limit)


Total contribution by employee


Total contribution by employer


Total Tier 2 NSSF contributions


Total NSSF contributions


Remittances to the fund should be made by the 9th day of each subsequent month.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young (Kenya), Nairobi

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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