PAYE for Employers Kenya — How to Calculate and File
Introduction
If you employ staff in Kenya, one of your tax responsibilities is handling PAYE (Pay As
You Earn).
PAYE is a system where employers deduct income tax from employee salaries and
remit it to the Kenya Revenue Authority (KRA) on behalf of employees. Employers are
required to deduct and remit PAYE using the applicable income tax rates.
PAYE applies whether you run:
- A small business
- A startup
- An SME
- A company with many employees
What Is PAYE?
PAYE is income tax deducted directly from employee earnings.
Taxable employment income may include:
- Basic salary
- Bonuses
- Commissions
- Overtime
- Allowances
- Some non-cash benefits
- Director fees and other employment-related payments
Who Must Register for PAYE?
Any person or business paying employment income is generally required to register
for PAYE obligations with KRA.
Examples:
- Sole proprietors with employees
- SMEs
- Companies
- NGOs
- Schools
How PAYE Is Calculated
The basic process looks like this:
Gross Salary
− Allowable deductions and reliefs
= Taxable Income
Apply PAYE rates
− Personal relief and applicable tax reliefs
= PAYE payable
Employers are required to apply applicable reliefs, deductions and exemptions
where eligible.
Simple Example
Suppose an employee earns:
Basic salary: KSh 80,000
Possible deductions may include:
- Pension contributions
- Statutory deductions
- Applicable reliefs
After adjustments:
Taxable income is determined and PAYE is calculated using prevailing tax bands.
Because tax rates and relief rules can change, many employers use payroll software
or KRA guidance tools instead of manually calculating every employee's PAYE.
Current PAYE bands range from 10% to 35% under prevailing rates.
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Step-by-Step: How to File PAYE
Step 1: Log into KRA iTax
Open:
KRA iTax Portal
Enter:
- KRA PIN
- Password
Step 2: Select File Returns
Navigate:
Returns → File Return
Choose:
Income Tax – PAYE
Step 3: Download the PAYE Return Template
KRA requires employers to download the PAYE filing template and complete
employee details.
Information commonly required:
- Employee names
- Employee KRA PINs
- Gross pay
- Tax deductions
- PAYE amount
KRA introduced simplified PAYE return processes and templates for employers.
Step 4: Validate the File
Validate the completed return.
The system generates a ZIP file for upload.
Step 5: Upload and Submit
Upload:
- Validated ZIP file
Accept terms and submit the return.
Step 6: Make Payment
PAYE deducted from employees must be paid to KRA.
Employers are required to file and remit PAYE on or before the 9th day of the
following month.
Example:
- PAYE deducted in April → file and pay by 9 May
Common Employer Mistakes
- Missing filing deadlines
- Using incorrect employee PINs
- Forgetting non-cash benefits
- Applying wrong tax reliefs
- Poor payroll records
Frequently Asked Questions
Do I file PAYE if I have one employee?
Yes. Employers paying employment income generally need PAYE obligations.
Do I file if there is no PAYE to declare?
Yes. Nil returns may still be required where applicable.
What happens if PAYE is filed late?
Late filing and payment can attract penalties and interest.
Key Takeaway
The PAYE process can be simplified as:
Register PAYE → Calculate payroll → Deduct tax → File through iTax → Pay by the
9th
For employers, accurate payroll records and timely filing can prevent penalties and
make tax compliance easier.
Related reading: how SHA deductions work, NSSF contributions and rates in Kenya, the housing levy explained, and retirement planning in Kenya. Explore pension products on Serrari.
