Kenyan employees’ pay slips are set to change once again, starting in February 2026, as the government implements the fourth phase of reforms under the National Social Security Fund (NSSF) Act, 2013, which introduced higher mandatory pension contributions.
The NSSF Act requires all employees aged 18 years and above, who have not yet reached retirement age and are subject to the Employment Act, to contribute six per cent of their pensionable earnings to the NSSF. Employers are legally obligated to match the employee’s contribution, meaning the total monthly savings credited to a worker’s retirement account is double the amount deducted from their pay slip.
The reforms are part of a five-year phased framework that has steadily raised mandatory pension contributions since February 2023, with the stated aim of strengthening retirement income security and expanding the coverage of formal pension savings.
While the contribution rate has remained unchanged, the reforms have focused on progressively increasing the earnings base.
NSSF tiers
The NSSF Act introduced a two-tier contribution system, designed to separate mandatory basic pension savings from higher-value retirement contributions.
Tier I applies to pensionable earnings up to a prescribed lower earnings limit, while Tier II applies to earnings above that threshold, subject to an upper cap.
Contributions under this tier must be remitted directly to NSSF. Subject to approval by the Retirement Benefits Authority (RBA), employers may channel Tier II contributions to approved private pension schemes or occupational retirement funds. Where Tier II is contracted out, the law requires that a minimum of 6% of the contribution still goes to NSSF.
Since implementation began, the earnings limits have been adjusted each year upward. In 2023, Tier I was capped at Ksh6,000 and Tier II at Ksh18,000. These rose to Ksh7,000 and Ksh36,000 respectively in 2024, before increasing again in February 2025 to Ksh8,000 for Tier I and Ksh72,000 for Tier II.
Also Read: Everything You Need to Know to Register for NSSF
From February 2026, the limits will rise further to Ksh9,000 for Tier I and Ksh108,000 for Tier II. The latest phase of the reform disproportionately affects middle- and high-income earners, particularly those earning above Ksh75,000, who will see noticeable increases in deductions.
Under the new limits, Tier I will attract a 6% deduction of Ksh540 per employee each month. Tier II contributions will then be calculated on earnings above the Tier I limit, up to the new upper cap. For an employee earning Ksh100,000, Tier I will account for Ksh540, while Tier II will be calculated on the remaining Ksh91,000, resulting in a contribution of Ksh5,460.
This brings the total monthly employee deduction to Ksh6,000, up from the current Ksh4,320. When matched by the employer, total monthly retirement savings for such an employee will rise to Ksh12,000.
Deductions to affect Kenyan pay slips
On the other hand, employees earning Ksh200,000 or more will hit the Tier II ceiling. In this case, Tier I remains at Ksh540, while Tier II is calculated on Ksh99,000, resulting in a deduction of Ksh5,940.
The total employee contribution will therefore rise to Ksh6,480 per month, with employers required to match the same amount, pushing total monthly remittances to the Fund to Ksh12,960 for top earners.
Workers earning below Ksh50,000 will not be affected by the 2026 adjustment, as their contributions remain within the existing thresholds. Contributions for employees earning Ksh25,000, Ksh35,000, and Ksh50,000 will therefore remain unchanged.
Also Read: NSSF Deposits to Sidian Bank Hit Ksh 800M for the First Time
Although some employees will see gross deductions rise by as much as Ksh2,160, the actual reduction in take-home pay will be lower because NSSF contributions are tax-deductible.
The effective reduction on payslips for top earners will be about Ksh1,512, rather than the full increase in deductions.
Workers enrolled in approved private pension schemes may also cushion the impact, as employers can reduce contributions to occupational schemes and redirect the funds to NSSF with the RBA’s approval, limiting the net effect on employees’ disposable income.
The stepped-up contributions have dramatically increased the size and influence of the Fund, making NSSF Kenya’s largest pension scheme.
Its assets rose to Ksh558 billion by June 2025, up from Ksh295.6 billion in December 2022, while annual contributions surged from Ksh19.29 billion to Ksh83.97 billion over the same period.
With the 2026 rates coming into force, annual inflows are projected to cross the Ksh100 billion mark. Employers are required to remit NSSF contributions by the 9th day of the following month, with penalties for late or non-remittance.
The reforms however come amid shrinking disposable incomes, with workers already grappling with additional deductions, such as the housing levy and healthcare-related contributions.
Follow our WhatsApp Channel and X Account for real-time news updates.
