Hey, it’s January 2026, and if you’re an employer juggling payroll or an employee checking your February slip, the National Social Security Fund (NSSF) is about to make another adjustment that could tweak your take-home pay or business costs.

The NSSF Act, 2013 has been rolling out in phases since February 2023, slowly ramping up mandatory pension contributions to build stronger retirement security for Kenyan workers. We’re now entering Year 4 of that five-year transition, and starting February 1, 2026, the pensionable earnings limits go up again.

This isn’t a new tax – it’s an expansion of the earnings base for the existing 6% employee + 6% employer contribution (total 12%). The goal? Bigger long-term savings for retirement, invalidity and survivor benefits. But in the short term, it means slightly higher deductions for many middle- and higher-income earners, plus increased payroll expenses for businesses.

Let’s break it down simply, with examples, so you can plan ahead without the panic.

Quick Recap: What the NSSF Act, 2013 Actually Does

Passed in 2013 to modernize Kenya’s pension system (replacing the old flat KSh 200 contributions), the Act introduced:

• 6% from employee + 6% matched by employer on pensionable earnings.
• Two-tier structure:
  • Tier I (Lower Earnings Limit): Mandatory remittance straight to NSSF.
  • Tier II (between Lower and Upper Limits): Can go to NSSF or, with Retirement Benefits Authority (RBA) approval, to a private approved scheme (contracting out).
• Phased rollout over five years (started Feb 2023) to avoid shocking businesses and workers.

The phased increases focus on gradually raising the Lower Earnings Limit (basic mandatory tier) and Upper Earnings Limit (cap for higher contributions).

The Big February 2026 Updates: New Earnings Limits

Effective February 1, 2026 (for February payroll):

• Lower Earnings Limit (Tier I): Up from KSh 8,000 to KSh 9,000.
  • Employee: 6% = KSh 540
  • Employer matches: KSh 540
  • Total for Tier I: KSh 1,080
• Upper Earnings Limit (Tier II): Up from KSh 72,000 to KSh 108,000.
  • The difference (Tier II base): KSh 108,000 – KSh 9,000 = KSh 99,000
  • Max Tier II contribution per party: 6% of KSh 99,000 = KSh 5,940
  • Overall max per party (Tier I + II): KSh 6,480
  • Total max monthly contribution (employee + employer): KSh 12,960

For anyone earning KSh 108,000 or more, the monthly NSSF deduction jumps from the current max of KSh 4,320 to KSh 6,480 (employee portion), with the employer matching – total KSh 12,960 per month per employee.

How This Actually Affects Take-Home Pay & Business Costs

• Low earners (below ~KSh 50,000): Minimal or no change. Their full salary often falls within the old limits anyway – e.g., someone on KSh 50,000 still contributes KSh 3,000 (6% of full pay), unchanged.
• Middle earners (e.g., KSh 75,000–100,000): Noticeable hit. Example: KSh 80,000 earner currently pays KSh 4,320; post-February, it rises to ~KSh 4,800 (extra KSh 480 deduction). Net pay drops, but remember – NSSF contributions are tax-deductible, so the actual take-home reduction is softer (around KSh 300–400 after tax relief).
• High earners (KSh 108,000+): Full impact – extra KSh 2,160 monthly deduction (from KSh 4,320 to KSh 6,480). Effective net pay drop ~KSh 1,500 after tax benefits.

For employers: Matching contributions rise accordingly – e.g., an extra KSh 2,160 per high-earner employee per month. Small businesses with several mid/high-salary staff could see payroll costs climb noticeably.

Late remittances? Penalties and interest kick in fast under the Act – remit by the 9th of the following month.

Employer Responsibilities: Stay Compliant or Face Penalties

To avoid headaches:

• Update payroll systems/software now to reflect new limits.
• Calculate employee 6% accurately on pensionable earnings.
• Add your matching 6% and remit total to NSSF by the 9th.
• Train HR/finance teams on the changes.
• If offering a private scheme for Tier II, ensure RBA approval is in place.

Employees: Budget for the higher deduction starting February – factor it into rent, school fees or savings plans.

Looking Ahead: The Long-Term Win (and Short-Term Squeeze)

These phased hikes aim to supercharge retirement security – NSSF assets have grown massively (from KSh 295 billion in 2022 to KSh 558 billion by mid-2025), with annual contributions projected to top KSh 100 billion post-2026. Better pensions mean stronger invalidity and survivor benefits for families.

But yes, it pinches now, especially with living costs still high. The government sees it as building domestic capital for infrastructure; workers see less cash today. Unions and critics argue for better governance to ensure the funds are used wisely.

Pro tip: If you’re in a private pension scheme, explore contracting out Tier II to potentially offset some impact (with RBA nod).

Practical Steps to Prepare Right Now

1. Review payroll – Run mock February calculations with new limits.
2. Update systems – Ensure your HR/payroll software auto-applies the changes.
3. Communicate – Brief employees on what to expect (transparency reduces shock).
4. Consult experts – Talk to payroll specialists or pension advisors (like Seal Associates) for smooth rollout.
5. Employees – Adjust budgets early, small tweaks now prevent bigger stress later.

This is the new reality of building a better pension system – one phased step at a time. If you’re feeling the squeeze or need help tweaking payroll, drop a comment or reach out. We’ve got your back.

Prepared by Godfrey Ndegwa, Seal Associates