In February 2026, Kenyan employees will see a change in their pay slips due to the continued implementation of reforms under the National Social Security Fund (NSSF) Act, 2013. These reforms are part of a five-year phased strategy aimed at strengthening retirement income security and expanding the coverage of formal pension savings. The new changes involve higher mandatory pension contributions and increased deductions, particularly for middle- and high-income earners. This article explains how these changes will affect Kenyan pay slips, including the updated contribution rates and how they will impact workers’ take-home pay.
The NSSF Contribution Reforms
The NSSF reforms are being rolled out gradually, with the goal of increasing the contribution limits and improving pension savings for employees. These changes started in 2023 and will continue until 2027, progressively raising the mandatory contribution limits each year. The reforms aim to ensure that more employees are contributing to their retirement savings and that the NSSF has the necessary funds to support workers in retirement.
Tier I and Tier II Contributions Explained
The NSSF Act introduced a two-tier contribution system, where:
- Tier I applies to pensionable earnings up to a prescribed lower earnings limit.
- Tier II applies to earnings above this limit, subject to an upper cap.
Employees must contribute 6% of their pensionable earnings to NSSF, with their employers matching the amount, making the total monthly savings in the employee’s retirement account double the amount deducted from their pay slip.
Impact of the 2026 Adjustments
Starting in February 2026, the earnings limits for the two tiers will rise again:
- Tier I will be capped at Ksh 9,000, with a 6% contribution of Ksh 540 per employee each month.
- Tier II will be capped at Ksh 108,000, with the 6% contribution applied to earnings above Ksh 9,000.
For employees earning Ksh 100,000:
- Tier I deduction: Ksh 540
- Tier II deduction: 6% of Ksh 91,000 = Ksh 5,460
- Total employee contribution: Ksh 6,000 per month, up from Ksh 4,320.
For higher earners, the impact will be more pronounced. For example, an employee earning Ksh 200,000:
- Tier I deduction remains: Ksh 540
- Tier II deduction: 6% of Ksh 99,000 = Ksh 5,940
- Total employee contribution: Ksh 6,480 per month.
In total, the employer will match this amount, leading to a combined contribution of Ksh 12,960 per month.
How It Affects Pay Slips
The primary effect of the NSSF contribution increase will be on middle- and high-income earners who will experience an increase in their monthly deductions:
- Employees earning below Ksh 50,000: There will be no significant impact, as they will remain within the current contribution limits.
- Employees earning Ksh 75,000 or more: They will see noticeable increases in their deductions. The total monthly deduction for these employees will rise by up to Ksh 2,160.
However, the actual reduction in take-home pay will be lower due to the fact that NSSF contributions are tax-deductible. For example, employees who experience a gross deduction increase of Ksh 2,160 will see an effective reduction of about Ksh 1,512 in their pay after tax adjustments.
How Employers Can Cushion the Impact
Employers who have existing pension schemes can offset some of the NSSF contribution increases. Under the new rules, employers can channel Tier II contributions to private pension schemes or occupational retirement funds, provided these schemes are approved by the Retirement Benefits Authority (RBA). This allows employers to maintain contributions to approved private pension schemes while ensuring that employees are contributing to NSSF as required by law.
Projected Growth of NSSF Contributions
With the full implementation of the 2026 contribution rates, annual inflows to the NSSF are expected to exceed Ksh 100 billion. This marks a significant increase in the size of the Fund, which was valued at Ksh 558 billion by June 2025, up from Ksh 295.6 billion in December 2022. These increased contributions are expected to bolster the Fund’s role as Kenya’s largest pension scheme, providing a more robust safety net for workers in retirement.
Challenges for Employees
While the reforms aim to improve retirement savings, the increase in deductions comes at a time when Kenyan employees are already facing financial pressure due to rising costs of living. Additional deductions for healthcare and the housing levy are further squeezing employees’ disposable incomes. Despite these challenges, the increased NSSF contributions are seen as a long-term benefit, ensuring better retirement security for Kenyans in the future.
Conclusion
The new NSSF deductions, starting in February 2026, will have a noticeable impact on Kenyan pay slips, particularly for middle- and high-income earners. The reforms, while increasing the financial burden in the short term, aim to secure long-term pension benefits for workers. By expanding the coverage of pension savings and increasing NSSF’s financial power, the government seeks to ensure a more sustainable retirement income for its citizens.
