How your payslip will look like in 2024

Apart from statutory deductions which have increased by 72 per cent, employees are expected to remit mandatory Pay-as-you-earn (PAYE).

In Summary
  • The new national health cover deductions will replace the current system based on gross salary brackets (ranging from Sh150 to Sh1,700).
  • This has seen the buying power of the once mighty Sh1,000 drop by almost half to Sh650, cutting items in a  complete food basket. 

If you earn a basic salary of Sh50,000 you should prepare to part with at least Sh1,375 for the Universal Health Coverage on top of other deductions introduced in July last year.

This is expected to further shrink the take-home package for employees in this bracket who in July witnessed new statutory deductions as President William Ruto's government mobilises resources to fund a debt-burdened budget.

The new national health cover deductions will replace the current system based on gross salary brackets (ranging from Sh150 to Sh1,700). Those earning a gross pay of Sh50,000 have been paying Sh1,200. 

The plan requires both employed and unemployed Kenyans to contribute 2.75 per cent of their gross monthly income to support the Universal Health Coverage scheme.

While this initiative is aimed at ensuring access to quality healthcare, it has generated mixed reactions, with those opposing it lamenting about poor or lack of state medical services when they need them. 

Even so, those supporting the new plan are happy that it will reduce the monthly contributions for low income earners, making healthcare services more affordable for both formal and informal sector workers.

Apart from the UHC deductions, employees earning between Sh50,000 and Sh60,000, such as teachers, entry-level journalists and bank tellers, are required to contribute six per cent of their monthly pensionable income to be marched by their employers.

There is a maximum contribution of  Sh2,160 for workers earning more than Sh18,000 per month. Employee contributions will still be drawn directly from their salaries and wages while employer contributions will still come directly from the employer.

Contributions relating to those in the lower earnings limit (a maximum of Sh720) are credited to what is known as a Tier I account while the balance of the contribution for earnings between the LEL and the upper earnings limit (up to a maximum of Sh1,440) is credited to a Tier II account.

Although a three-judge bench struck down the housing levy on November 28, it stayed the orders until January 10, 2024, on the prayers of the state's legal team led by lawyer George Murugara.

On Thursday, the Court of Appeal maintained the status quo, meaning, salaried Kenyans will continue being deducted the 1.5 percent of gross matched by another 1.5 per cent.

The court will give a verdict on the matter on January 26.

For someone earning Sh50,000, at least Sh750 will be deducted from the salary, pushing total statutory deductions to Sh4,285. 

Apart from statutory deductions that have increased by 72 per cent, employees also remit the mandatory Pay as You Earn tax.

PAYE applies to individuals with a monthly employment income of Sh24,000 and higher. This obligation extends to both residents and non-residents engaged in gainful employment, as well as any entity disbursing emoluments to its employees.

For those earning a basic salary of Sh50,000, they are expected to part with Sh8,691.65, pushing total deductions to Sh12,975. This means they will take home close to Sh37,000. 

The payslip for employees in this bracket has since shrunk by close to Sh3,800.

Calculations by the Star show that the take-home salary for workers who fall in the average middle-class family in Nairobi, according to computation on expenditure pattern by the Kenya National Bureau of Statistics, will reduce from the current average of Sh76,041 to Sh71,661.

This is after an employee earning a gross monthly salary of Sh100,000 pays Sh2,750 for universal health coverage, Sh1,500 for housing levy, and Sh6,000 to cover the National Social Security Fund.

Total statutory deductions less PAYE relief of Sh2,400 brings net statutory deductions to Sh7,850.

This added to a PAYE deduction of Sh21,804 puts net pay for those earning Sh100,000 at Sh70,346. 

Those in the upper salary class of above Sh600,000 will part with Sh195,000 as PAYE, six per cent of Sh36,000 to NSSF, Sh9,000 for housing levy and Sh1,650 for universal health cover. 

This means a total of Sh241,650 will be deducted less Sh2,400 as PAYE relief, putting the take-home amount to Sh360,750. 

All these statutory deductions are to be matched by the employers. 

The shrinking payslip is, however, not in sync with the rising cost of living, with prices of essential products like fuel having skyrocketed in the past year. 

Solomon Kiguma, a data analyst at a local IT firm, says his salary has stagnated in the past five years despite the rapid increase in statutory deductions. 

"I have been earning Sh80,000 for the past five years. Sad that my take-home is shrinking every year amid the high cost of living," he said. 

"I give this government more than Sh20,000 in taxes. This has worsened in the past 12 months with the introduction of the Housing Levy and upward adjustment on NHIF and NSSF."

Although the Energy and Petroleum Regulatory Authority retained the price of a litre of super petrol at Sh217.36 in Nairobi in the latest review, the price is Sh40 more compared to Sh177.30 per litre in the same period last year.

The prices of a litre of diesel and kerosene dropped by Sh2 to Sh203.47 and Sh203.06 respectively. 

Without the stabilisation, the actual fuel prices for the November-December cycle would have been Sh229.37 for a litre of super petrol, Sh223.29 for a litre of diesel and Sh206.70 for a litre of kerosene.

The cost of food on the other hand increased 7.70 per cent in December 2023 over the same month in the previous year.

The cost of other essentials like electricity, education and housing have also skyrocketed in the past year, pushing up the overall cost of living.

This has seen the buying power of the once mighty Sh1,000 note drop by almost half to Sh650, cutting items in a  complete food basket. 

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