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| President William Ruto |
Employees in Kenya are expecting a reduction in payslips this October 2024 after the court upheld the Finance Act 2024. President William Ruto speaking at a past event. A seven-judge bench led by Chief Justice Martha Koome overturned the Court of Appeal decision terming the finance law unconstitutional. In July 2024, petitioners, including Busia Senator Okiya Omtatah, challenged the finance law, citing the lack of merit in how public participation was conducted in the process of enacting the Finance Bill 2023.
However, the Supreme Court established that MPs passed the tax-laden law after considering the views of the public. Is Housing Levy constitutional? This followed the High Court ruling that the Affordable Housing Act 2024 is constitutional, upholding the 1.5% Housing Levy on gross salaries. The petitions targeted sections 4 and 5 of the act, questioning the legality of the levy and the appointment of the Kenya Revenue Authority’s Commissioner General as the collector.
A three-judge bench comprising Justices Olga Sewe, John Chigiti, and Josephine Mong’are found that there was adequate public participation and dismissed attempts to nullify it. The levy is part of key mandatory deductions such as SHIF on the employee payslip. Which taxes will employees pay starting October 2024?
1. Housing Levy
President William Ruto’s administration introduced a 1.5% levy on employees’ gross salary to support its affordable housing agenda. The taxes remitted to KRA are 1.5% of the employee’s gross monthly salary, which is matched by 1.5% of the employer’s gross monthly salary. For a worker earning KSh 50,000 gross salary per month, the housing levy deduction will amount to KSh 750.
2. SHIF
On October 1, 2024, the government launched the Social Health Authority (SHA) to take over from the National Hospital Insurance Fund (NHIF). SHA directed employees to deduct 2.75% of their workers’ gross salaries from the Social Health Insurance Fund (SHIF) on their October payslips. Employees earning KSh 50,000 gross salary expect a deduction of KSh 1,375 towards SHIF.
3. NSSF
In January 2024, the National Social Security Fund (NSSF) directed employers to implement the second-year schedule of the NSSF Act 2013. The NSSF Act 2013 directed an increase in NSSF monthly contributions every year for five years. The new deductions will see employees earning KSh 50,000 per month, part of KSh 2,160.
4. PAYE
The Finance Act 2023 introduced a maximum Pay as You Earn (PAYE) tax and from 32% to 35%. Starting this October, a worker earning KSh 50,000 gross salary per month will pay KSh 6,622 in PAYE deductions. What are the total tax deductions in October 2024? The maximum deductions expected in the October 2024 payslip for employees in Kenya amount to a gross salary percentage of about 50%.
A worker earning KSh 50,000 will, therefore, pay KSh 10,877 per month in tax and levies to the government. The employee’s net monthly salary will amount to KSh 39,092 after all the deductions. Do Kenyans expect tough economic times? Meanwhile, the International Monetary Fund (IMF) revised Kenya’s projected GDP growth from 5.3% to 5%. This comes after President William Ruto withdrew the controversial Finance Bill 2024 following the anti-tax protests nationwide. Central Bank of Kenya (CBK) attributed the slow growth to heightened geopolitical tension in the country, among other risks.
by Wycliffe Musalia