Explainer: How new NSSF deductions will hit your 2026 pay
By Aloys Michael, December 22, 2025Kenyan workers’ pay slips will change again from February 2026 as the fourth phase of National Social Security Fund (NSSF) reforms takes effect, raising mandatory pension contributions.
Employees contribute 6 per cent of their pensionable pay, with employers matching the amount, doubling monthly retirement savings.
While the rate stays the same, the reforms increase the earnings base to boost retirement savings.
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NSSF tiers
The NSSF Act introduced a two-tier system, separating mandatory basic pension savings (Tier I) from higher-value contributions (Tier II), with options to contract out part of Tier II subject to RBA approval.
Earnings limits under both tiers have been revised upward annually since 2023, significantly expanding the contribution base.
From February 2026, Tier I will rise to Ksh9,000 and Tier II to Ksh108,000, marking the fourth year of higher thresholds under the law.
Under the new limits, Tier I will attract a 6 per cent 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 hit Kenyan pay slips
For higher earners, the impact is more pronounced. 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 changes, with unchanged contribution levels, while higher earners, especially above Ksh75,000, will see increased deductions.
For top earners, the effective reduction in take-home pay will be about Ksh1,512, as NSSF contributions are tax-deductible.
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 Retirement Benefit Authority (RBA )approval, limiting the net effect on employees’ disposable income.
Stepped-up contributions have significantly expanded NSSF’s size and dominance, with assets rising to Ksh558 billion by June 2025 and annual inflows projected to exceed Ksh100 billion after 2026.
However, the reforms come amid shrinking disposable incomes, as workers and employers face higher deductions and strict remittance deadlines with penalties for delays.