Does a Foreign Employer Have to Register for Payroll in Kenya? PAYE, NSSF, SHIF and Housing Levy

When a foreign employer pays a remote worker in Kenya from abroad, the question is whether it must register for payroll with Kenyan authorities. The answer differs by obligation. This article walks through PAYE, NSSF, the Social Health Insurance contribution and the Affordable Housing Levy for a foreign employer, and marks the points the legislation leaves open.

PAYE: the Income Tax Act

Section 37 of the Income Tax Act requires an employer paying emoluments to an employee to deduct and account for tax as prescribed. Failure attracts a penalty of 25 per cent of the tax, or KSh 10,000, whichever is greater. The difficulty for a foreign employer is the definition of “employer” in section 2. It includes any resident person responsible for the payment of emoluments, and any agent, manager or other representative responsible for the payment in Kenya on behalf of a non-resident employer.

A U.S. company with no Kenyan presence that pays its employee from a U.S. bank account is not clearly within that definition. We do not read the Act as settling that point either way, and we would not advise a foreign employer to treat the lack of a registered presence as a safe harbour. If the company has a Kenyan representative who pays or manages pay, if it creates a permanent establishment, or if it uses a local payroll provider, the PAYE duty is much easier to see. Separately, the employee’s own income remains taxable in Kenya if she is resident, as covered in our article on Kenyan tax on a remote worker, so non-registration moves the compliance burden onto her rather than removing the tax.

NSSF

The National Social Security Fund Act, 2013 defines an “employee” in section 2 to include a person employed in Kenya under a contract of service. Section 19(1) requires every employer who employs one or more employees under a contract of service to register as a contributing employer and register those employees. Section 20(1) sets the employer and employee contributions at 6 per cent each of pensionable earnings, and the payment is due by the ninth day of each month under section 20(1A). The earnings limits that cap the contribution are set by separate notice and change, so confirm the current figures with NSSF before budgeting.

The Act speaks of a person employed in Kenya, so the question is whether a worker based in Kenya for a foreign employer is “employed in Kenya”. On the text, she plausibly is. Whether NSSF will enforce against an employer with no Kenyan presence is a practical question, but the statutory exposure is the employer’s.

Social Health Insurance contribution

Under the Social Health Insurance Act, 2023, section 26(2) makes a non-Kenyan ordinarily resident in Kenya eligible to register. Section 27(1)(b) makes a non-Kenyan resident, ordinarily residing in Kenya for more than twelve months, liable to contribute. For salaried households, section 27(2)(a) provides for contribution by monthly statutory deduction by the employer at a rate prescribed under the Act. We have not stated the rate here because it is not in the Act text and is set by regulation. A worker on a permit of one year or longer is likely to fall within the liability, and one who intends to stay for less than twelve months faces a different rule about holding travel or health insurance in section 26.

Affordable Housing Levy

The Affordable Housing Act, 2024 sets the levy under section 4(2) at 1.5 per cent of the employee’s gross salary, and section 4(3) makes it payable by the ninth working day after the end of the month. Under section 5(1), the employer deducts and remits the employee’s amount and remits an equivalent amount as the employer’s contribution. As with NSSF, the duty attaches to the employer of a Kenyan-based employee.

Each obligation has its own deadline, and they fall due in the month after the pay month: the NSSF payment is due by the ninth day, and the Housing Levy by the ninth working day. Whichever route the employer chooses, it should keep payslips, bank records and a record of the days worked in Kenya, because those documents also support the worker’s own tax return and any permit renewal. The permit application itself asks for payslips or bank statements, as noted in our guide to the Class N permit.

Options for a foreign employer

There are three practical routes. The first is to register in Kenya as an employer, which means KRA, NSSF and the other registrations, and is simplest if the company expects more hires. The second is to use an employer of record, which employs the worker locally and runs payroll in return for a fee. The third is a Kenyan subsidiary, covered in our guide to branch or subsidiary taxation and our guide to foreign company registration. Doing nothing is also a choice, but it leaves open the statutory exposure described above.