Since the implementation of the NSSF Act 2013, the rates and limits for statutory pension contributions in Kenya change annually as we progress through the multi-year phase-in period.

Now in Year 3 (2026) of the implementation, the upper limits have increased significantly. Understanding how to split Pensionable Pay into Tier I and Tier II is critical to ensuring your employees' retirement funds are compliant and your payroll avoids audit penalties.

What are NSSF Tier I and Tier II?

The total NSSF contribution rate is 12% of Pensionable Pay, split equally between the employer (6%) and the employee (6%). However, this 6% is calculated across two distinct tiers to protect low-income earners while allowing high-income earners to save more.

• Tier I: Calculated on pensionable pay up to the Lower Earnings Limit. These funds are managed directly by NSSF.
• Tier II: Calculated on pensionable pay between the Lower Limit and the Upper Limit. Employers can opt to pay these funds into a private, KRA-approved provident fund instead of NSSF.

The 2026 NSSF Limits

For the 2026 payroll year, the limits have been adjusted as follows:

• Lower Earnings Limit (Tier I maximum): KES 9,000
• Upper Earnings Limit (Tier II maximum): KES 108,000

This means the maximum possible NSSF deduction for an employee in 2026 is KES 6,480 (6% of 108,000).

How to Calculate NSSF in 2026 (Examples)

Example A: Employee earning KES 30,000 (Basic Salary)

• Tier I: The first 9,000 is taxed at 6%. (9,000 × 0.06) = KES 540
• Tier II: The remainder (30,000 - 9,000 = 21,000) is taxed at 6%. (21,000 × 0.06) = KES 1,260
• Total Deduction: KES 540 + KES 1,260 = KES 1,800

Example B: Employee earning KES 150,000 (Basic Salary)

• Tier I: The first 9,000 is taxed at 6% = KES 540
• Tier II: The remainder up to the upper limit (108,000 - 9,000 = 99,000) is taxed at 6%. (99,000 × 0.06) = KES 5,940
• Total Deduction: KES 540 + KES 5,940 = KES 6,480
• Note: The salary above 108,000 is not subject to mandatory NSSF.