The Social Health Insurance Fund replaced NHIF from 1 October 2024. For a payroll the change looks simple: a new rate and a new payee. In practice it changed three things at once. The deduction now scales with pay and has no ceiling. It moved from a tax relief to a tax deduction. And it is filed with a different authority on a different portal.
The rule
| Item | Position from 1 July 2026 |
|---|---|
| Rate | 2.75% of gross pay |
| Minimum | KES 300 a month |
| Maximum | None |
| Who pays | Employee only. There is no employer share |
| Tax treatment | Deducted from pay before PAYE (since 27 December 2024) |
| Paid to | Social Health Authority (SHA) |
| Due | 9th of the following month |
The employer has no matching contribution. Its job is to deduct, remit and keep employee records current with SHA. The cost of getting that wrong falls on the employer.
What changed from NHIF
NHIF used a banded table that stopped at KES 1,700 a month for anyone earning KES 100,000 or more. SHIF is a straight percentage. For senior staff the difference is large:
| Gross pay (KES) | SHIF at 2.75% |
|---|---|
| 8,000 | 300.00 (minimum applies) |
| 60,000 | 1,650.00 |
| 100,000 | 2,750.00 |
| 400,000 | 11,000.00 |
The minimum bites on any gross below about KES 10,909, where 2.75% would come to less than KES 300. That catches part-time staff, interns on small stipends and anyone paid for only part of a month.
SHIF and PAYE: relief, then deduction
When SHIF started in October 2024, it took over NHIF’s tax treatment: employees got insurance relief of 15% of the contribution. The Tax Laws (Amendment) Act 2024 changed that from 27 December 2024. SHIF is now an allowable deduction, taken off gross pay before the tax bands, and the old relief no longer applies to it.
For most employees the deduction is worth more than the old relief. At KES 60,000 gross, SHIF of KES 1,650 comes off taxable pay. The employee’s top band is 30%, so it saves KES 495 of PAYE, against KES 247.50 under the 15% relief.
On the KRA side, the simplified P10 return has a SHIF column on Sheet B. KRA’s guide says the amount is calculated offline at 2.75% of gross and keyed in, so your SHA figure and your P10 figure must agree employee by employee. If they don’t, either the SHA schedule or the PAYE is wrong.
One mistake still turns up in payrolls that were patched rather than rebuilt in early 2025: a row of “insurance relief” equal to 15% of SHIF alongside the deduction. That gives the relief twice and under-deducts PAYE. If a payslip shows both, correct it and work out how many months are affected.
What counts as gross pay
SHIF is charged on gross salary, so build the base from every cash earning in the month: basic, allowances, overtime, commission, bonus and leave pay. Payrolls go wrong in two common ways:
- Charging SHIF on basic only. An employee on KES 50,000 basic and KES 20,000 of allowances owes KES 1,925, not KES 1,375.
- Leaving bonus months out. A KES 200,000 December bonus carries KES 5,500 of SHIF in December. There is no annual cap to stop it.
Whether a benefit in kind, such as a car benefit with no cash attached, belongs in the SHIF base isn’t spelled out the way cash pay is. If you have material non-cash benefits, confirm the treatment with SHA in writing rather than guessing.
Employees with irregular pay
SHIF follows the pay you actually make in the month, not a contracted figure.
- Overtime and commission earners pay 2.75% of whatever the month’s gross comes to. Expect the deduction to move every month. That’s correct, not a calculation error.
- Low months are lifted to the KES 300 minimum. An employee on unpaid leave for most of a month who receives KES 8,000 still has KES 300 deducted.
- Months with no pay at all, such as long unpaid leave, are a grey area for the payroll. Don’t invent a deduction from nothing. Ask SHA how it wants the employee shown on the schedule, and keep the answer on file.
- Casual and short-term workers on your payroll are employees for SHIF purposes. Deduct from what you pay them. The guide to casual workers covers the wider rules.
- Staff with two employers pay SHIF through each payroll on that employer’s pay. Neither employer can reduce its deduction because the other has already deducted.
Filing and paying
Employers register on the SHA employer portal (employers.sha.go.ke) and get an employer SHA number. Each employee needs to be registered with SHA as well. Their SHA number is what links your remittance to their cover. Keep those numbers in the employee record and chase any that are missing before the first payroll, not after.
Each month, submit the contribution schedule and pay by the 9th of the following month. The 9th is the same date as PAYE and NSSF, so plan one remittance day for all three. The filing calendar lists the dates.
The Social Health Insurance Act sets a penalty of 2% of the unpaid contribution for each month it stays unpaid, under section 27(6). Failing to remit without lawful excuse is also an offence, with a fine of up to KES 2 million, imprisonment, or both. Late remittances can also cause problems for employees trying to use their cover, and that usually reaches HR before it reaches finance. The guide to payroll penalties puts SHIF alongside the other statutory deadlines.
A quick monthly check
Before you approve the run, compare total SHIF with 2.75% of total gross pay. The two should be close, a little higher for SHIF where some employees are on the KES 300 minimum. A large gap usually means a pay item has been left out of the base.
To check an individual figure, use the SHIF calculator.