Net pay calculator Kenya 2018

Net pay calculator Kenya 2018

When it comes to the payslip, most working Kenyans are concerned more with what they get at the end of the month (net salary) than by the deductions made every month. In Kenya, anyone that earns an income must pay a mandatory income tax through a deduction known as Pay As You Earn (PAYE). This income tax which is deducted from the gross pay is calculated according to the amount of salary your employer pays you on a monthly basis and paid directly to the Kenya revenue authority (KRA). The income tax guidelines can be confusing and challenging to calculate. Lucky for you, the net pay calculator Kenya will compute all your dues to KRA based on recent PAYE requirement and give you an accurate estimation of your net pay. Whether you’re in a formal work sector, retiring or self-employed, this post will cover how to calculate the final net pay figure including the various tax deductions involved.

Net pay calculator Kenya: How to come up with the final figure

Source: Portugal Resident

Difference between gross and net income

Gross salary is the total amount you earn before tax deductions while net pay is the amount you take home after all mandatory deductions have been made. A net pay salary calculator Kenya can simplify the whole process of calculating your net salary. The calculations generally first start with your gross salary then mandatory payments such as PAYE, NHIF and NSSF are deducted. This will give you a rough estimate of your net pay. To do gross calculations, use the gross net pay calculator in Kenya which will make it easier for you as the system will do accurate calculations.

Statutory deductions in Kenya

While income tax is the common yet not the only tax that is deducted from a payslip, tax often contributes to a large chunk of the deductions. Knowing the amount and what type of deduction is made from your salary will ensure that you notice or know when an employer takes advantage of you. Also, with the knowledge, you can be able to understand how much money needs to be deducted when it comes to insurance and taxes. Additionally, it’s important to remember that statutory deductions and a payslip are compulsory for every working Kenyan. Apart from PAYE which can be calculated using PAYE calculator Kenya from net pay, some of the top statutory deductions in Kenya that you can expect to get from your payslip include:

National Social Security Fund (NSSF)

NSSF can be termed as more of an insurance for retirement or when you get laid off as compared to the standard deductions that you pay the government. Every working Kenyan citizen whether in formal or informal work sector must save part of their salary with NSSF. The withdrawal benefit can be given to you when you attain 50 years and above or retire from your regular source of employment. To access your pension, you will need to have your letter of termination or resignation as proof.

National Hospital Insurance Fund (NHIF)

Paying NHIF will enable you as a Kenyan citizen to access affordable healthcare services. Whether you are in a formal or informal sector, as long as you’re registered with NHIF, you can enjoy the various health benefits including using the NHIF card to pay for hospital bills. Those in the informal sector, retirees or self-employed have to pay Sh500 per month to access the NHIF benefits. People working in the formal sectors are required by law to be members of the NHIF from which a deduction shall be automatically done on their gross salary based on the new premium NIF rates.

Filling and calculating all your statutory deductions can be challenging especially for those who lack financial skills. Net pay calculator Kenya helps you easily fill in all the required details and allow the system to do all the necessary calculations.

Value Added Tax (VAT)

You are expected by the government to pay VAT if your business deals with taxable products and services. You must know how to pay this tax because failure to remit can have dire consequences. The due date to file returns is before or on 20th of the month. VAT amount is calculated by obtaining the difference between purchases and sales of the month.

Net pay calculator Kenya

Source: Square Root Financial

Rental income tax

Rental income tax is a recent tax introduction which requires all business or individual that receives a rental income to pay 10% of the rental income. Landlords or anyone with a residential property who is eligible for this tax must file their tax by 20th of every month through the iTax system. Unlike when filing tax on the old system, the new way of calculating this tax doesn’t involve deducting all expenses first.

As a landlord, because you will be filing returns on a monthly basis, you will not have to keep on producing records of the expenses on a yearly basis. This factor prevents so much hustle as creating and printing these records required landlords to have certified accountants. However, as a landlord, you can use a simplified net pay calculator for Kenya to evaluate your rental income tax based on the new tax rates.

READ ALSO: How to Get EACC Clearance Certificate in Kenya Without Much Hustle

Other permitted deductions

Other permitted deductions that can be made from your payslip include:

Loans, salary deductions for days when the employee was absent without consent or leave and union dues.

  • Salary advance

Most working people assume that they have a right to ask and receive a salary advance from their employer. However, according to the employment act, this is not a mandatory thing for the employer. If you take a salary advance, the amount will be deducted from your gross pay which in turn ends up reducing the final net amount that you receive.

  • Tax relief

Tax relief is a form of discount that the Kenyan government gives taxpayers to reduce the monthly tax rate burden for all low-income earners. The reliefs which were announced during the 2016/2017 budget was a good welcome to the Kenyan citizens in the lowest income bracket as they provide more comfort especially in the rapid change of living cost. In Kenya, workers who receive an income are eligible to receive tax relief in the form of insurance relief and personal relief. The government also grants mortgage relief to encourage housing growth and development. Tax relief covers your children’s education. Through the tax relief, disabled persons who receive an income are exempted from taxable income.

  • Personal relief

Personal tax relief is granted to employees by employers irrespective of their marital status. A monthly personal relief (MPR) for all working individuals has increased from Sh1, 162 per month to sh1280. When computing PAYE using Kenya net pay calculator, personal relief has to be considered while the insurance relief is anticipated to be zero. To compute PAYE combine the basic salary and benefits given and then include the correct personal reliefs.

  • Insurance relief

All Kenya employees are eligible for an insurance relief on insurance policies such as education policy for their children, as well as life insurance for yourself or spouse. According to the income tax act, a person who has a life insurance policy gets a tax relief. For example, if you have a gross salary of Sh35, 000 you will pay NSSF of Sh1080, personal relief of Sh1280, a tax deduction of about Sh3,945, NHIF of Sh950. With all these deductions you can expect your net salary to be around Sh29, 027. However, the rate of this tax relief is reviewed from time to time, so it’s best to confirm the percentage with KRA.

Who will benefit from income tax change?

The recent changes in income tax law in Kenya will enable employees to enjoy lower taxes which includes a higher personal relief. You can use online net pay calculator Kenya to determine how your income tax has changed. But who exactly will benefit from a lesser tax burden.

  • Workers who earn Ksh.10, 000

Employees such as cleaners, general laborers, messengers, domestic workers, caretakers, artisans and other subordinate staff who earn Sh10, 164 on a monthly basis will be exempted from paying an income tax as the lowest taxable brackets payable per month has been increased to sh11, 180. The minimum pay increment also applies to those paid an hourly, daily or monthly wage.

  • Workers who earn Ksh.38, 000

Any worker that earns a salary of Sh38, 893 per month will also enjoy and benefit from the reduction as the highest income tax rate applies to all employees that earn Sh42, 782 and above.

How dues are calculated after job resignation or retirement

The dues you are to receive after resigning from a job will depend on several factors like the total amount of unpaid salary, overtime, leave days, payment in lieu of notice, statutory deductions and staff account deductions. An employee is expected by law to pay a worker in lieu of notice period but not when the employee resigns. Through the NSSF pension funds, a retiring individual may opt to either receive a lump sum payment or an annuity.

Gratuity or service pay can also be given when a worker resigns or retires. Other circumstances that can make an employee qualify for gratuity is death or disability caused by a work-related issue. While in most cases gratuity is given with discretion it’s often calculated by multiplying the number of years served with a specific percentage of the gross salary.

Though similar to gratuity, service pay is only given at the end of your employment and refers to payment given after a job is terminated. Using a net pay calculator for Kenya, service pay is calculated based on the period the employee has worked and the monthly net earnings they have been receiving. You will not be eligible for service pay if your registered member of a pension fund.

How dues are calculated when a company is changing its name

If a company you’re working for is closing down, you will be paid based on the number of days worked, notice period and leave acquired. However, if the company is just changing its name or ownership, you will be given a review of the employment contract which can alter your final net pay.

How the salaries of part-time workers are calculated using net pay calculator Kenya

Casual or part-time employees with a contract that extends to more than 30 days must be added to a payroll as their salary is calculated based on whether they are paid daily, weekly, biweekly or monthly. To calculate the exact amount an employee is paid using an online net pay calculator Kenya, the monthly salary net figure is divided by the number of times the worker is paid during that particular month.

Knowing how to calculate net pay will help you clearly understand your monthly income and expenses which makes the budgeting process so much easier and better. On the other hand, failure to pay the right amount for all your taxes can result in heavy penalties. Therefore, to ensure you have paid the right amount of tax, get the relevant tax rates from KRA and use a net pay salary calculator Kenya to calculate your tax liability and to confirm accuracy.


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