Key takeaways
- How the Housing Levy Is Calculated
- Worked Example for a Monthly Payroll
- Who Must Pay the Housing Levy
- Remitting the Housing Levy via iTax
The Affordable Housing Levy is a mandatory payroll contribution under the Affordable Housing Act, 2024. It requires an employee contribution of 1.5% of gross monthly salary and an equal employer contribution of 1.5%. For payroll teams, this means the levy affects both net pay and the employer's total staff cost.
This guide was refreshed on 1 July 2026. Employers should confirm the current Affordable Housing Levy treatment with KRA before filing monthly payroll returns.
How the Housing Levy Is Calculated
The Housing Levy is computed as 1.5% of the employee's gross monthly salary. The employer must match this with an equal 1.5% contribution, bringing the total remittance to 3% of gross salary. Gross salary normally includes basic pay and regular cash earnings such as allowances, bonuses, overtime, and commissions. There is no upper cap in the standard payroll formula.
| Gross Salary (KES) | Employee 1.5% | Employer 1.5% | Total Remittance |
|---|---|---|---|
| 30,000 | 450 | 450 | 900 |
| 50,000 | 750 | 750 | 1,500 |
| 80,000 | 1,200 | 1,200 | 2,400 |
| 100,000 | 1,500 | 1,500 | 3,000 |
| 150,000 | 2,250 | 2,250 | 4,500 |
Worked Example for a Monthly Payroll
If a business has ten employees each earning KES 50,000 gross salary, the employee Housing Levy is KES 750 per employee and the employer matching contribution is also KES 750 per employee. The total employee deduction is KES 7,500, the total employer contribution is KES 7,500, and the total remittance is KES 15,000. The staff will see only the employee deduction on their payslips, but management must budget the full remittance.
Who Must Pay the Housing Levy
- All employees in formal employment, whether in the public or private sector.
- Employers must deduct the employee portion and add their matching contribution.
- Self-employed individuals and persons in the informal sector are not currently required to contribute, though voluntary registration is available.
- Kenyan citizens working for foreign organizations within Kenya are also subject to the levy.
Remitting the Housing Levy via iTax
The Housing Levy is remitted through the KRA iTax platform alongside monthly payroll obligations. Employers should reconcile three figures before filing: the employee deductions shown on payslips, the employer matching contribution, and the total amount paid to KRA. The deadline is aligned to the monthly PAYE filing cycle, so most employers treat it as part of the same payroll close process.
Do not confuse the employee deduction with the employer contribution. The employee amount reduces take-home pay, while the employer amount is an additional payroll cost that should be booked separately.
Controls to Add to Your Payroll Process
- Show the employee Housing Levy deduction separately on the payslip.
- Show the employer matching contribution in payroll cost reports even though it is not deducted from net pay.
- Reconcile the Housing Levy schedule against the KRA payment confirmation.
- Check employees with partial-month pay, unpaid leave, commissions, or bonuses because their gross pay base may change.
- Avoid hardcoding a fixed monthly levy amount for employees whose gross pay changes.
Common Housing Levy Mistakes
- Calculating only the employee deduction and forgetting the employer matching contribution.
- Using basic salary instead of the correct gross salary base for employees with allowances or commission.
- Posting the whole remittance as an employee deduction in accounting instead of separating employer cost.
- Failing to update payroll after salary changes, bonuses, or partial-month pay adjustments.
- Filing a KRA amount that does not match the payroll summary and payslip deductions.
Accounting Treatment for the Levy
The employee Housing Levy deduction should reduce the employee's net pay and sit as a payable until remitted. The employer contribution should be recorded as an employer payroll expense and also sit as a payable until remitted. Keeping those two sides separate makes payroll reports easier to review and prevents the business from mistaking an employer cost for money deducted from staff.
Month-End Reconciliation Checklist
- 1Compare the Housing Levy total on payslips with the employee deduction schedule.
- 2Confirm the employer matching contribution equals the expected 1.5% employer side.
- 3Reconcile the combined payable to the KRA filing and payment confirmation.
- 4Review employees with variable pay because the levy changes when gross pay changes.
- 5Save the payroll summary, filing confirmation, and receipt in the same monthly payroll folder.
