Career advice · Updated October 2026
Salary Deductions in Kenya: What Your Employer Can Deduct and the One-Third Rule
Your contract says one figure, your bank alert says another. Some of the gap is tax and statutory contributions, but employers also deduct for loans, SACCOs, damaged equipment, cash shortages and days absent. Salary deductions in Kenya are controlled by sections 17 to 25 of the Employment Act, 2007. The starting point is that you must be paid your whole wage, and every deduction needs a legal basis. Here is what is allowed, the limits, and what to do when money is taken wrongly or never reaches its destination.
The rule: full wages, with listed exceptions
Section 17(1) requires an employer to pay “the entire amount of the wages earned” directly to the employee, in Kenyan currency, in cash, into your bank account, by cheque or to someone you have authorised in writing. Section 19(1) then lists the only deductions an employer may make:
| Section 19(1) | Deduction allowed | Condition |
|---|---|---|
| (a) | Pension, provident fund or other approved scheme | You agreed to contribute |
| (b) | Damage to or loss of employer’s property | Caused by your wilful default, and the amount must be reasonable |
| (c) | Absence | Up to one day’s wages for each full working day absent without leave or lawful cause |
| (d) | Cash shortages | Only if your contract specifically provides for handling money and the shortage came from your negligence or dishonesty |
| (e) | Overpaid wages | Money paid to you in error as wages |
| (f) | Deductions required by law, a collective agreement, wage determination, court order or award | PAYE, NSSF, SHIF, Housing Levy, union dues under a CBA, court orders |
| (g) | Deductions you asked for in writing | The employer has no direct or indirect interest, for example a SACCO or insurance premium |
| (h) | Repayment of a loan from the employer | Written agreement, capped at 50% of wages left after other deductions |
| (i) | Anything else the Cabinet Secretary prescribes | Through regulations |
Anything outside the list, such as a “fine” for lateness, a uniform charge you never agreed to, or a deduction for a customer’s unpaid bill, needs a basis in one of these paragraphs or it is unlawful.
The two-thirds cap: you keep at least a third
Section 19(3) says the total of all deductions under section 19(1) at any one time must not exceed two-thirds of the wages, unless the Cabinet Secretary prescribes otherwise. In other words, at least a third of your wages must reach you. Statutory deductions count towards the cap, because they fall under paragraph (f).
Worked example for Njeri, on a gross salary of KSh 40,000, using our payroll calculator figures for 2026:
- Statutory deductions (NSSF KSh 2,400, SHIF KSh 1,100, Housing Levy KSh 600, PAYE KSh 3,153.35): KSh 7,253.35.
- Two-thirds cap on all deductions: KSh 26,666.67.
- Minimum Njeri must receive: KSh 13,333.33.
- Room left for SACCO, loan and other deductions: KSh 19,413.32.
Run your own figures through our net salary calculator or PAYE calculator, then add your other deductions and compare the total with two-thirds of your gross.
Employer loans have their own 50% limit
Under section 19(1)(h), repayments of a loan from your employer cannot exceed 50% of the wages payable after all other deductions. If Njeri has no other deductions besides statutory ones, the maximum monthly repayment to her employer is half of KSh 32,746.65, or KSh 16,373.33. If she also pays KSh 5,000 a month to a SACCO, the ceiling falls to KSh 13,873.33.
Section 17(9) adds a further protection: where an employer advances more than one month’s wages (or more than two months’ wages for an employee on a written contract), the excess cannot be recovered in court.
Deductions that are never allowed
- Paying for the job. Section 19(2) bans deductions made as a reward for giving you a job or keeping you in it. Section 17(4) also bans anyone from offering an advance on condition that a person takes up employment.
- Controlling how you spend your pay. Section 17(11) bars an employer from requiring you to spend your wages at a place, or for a purpose, in which it has an interest, such as a company shop.
- Wages paid in a bar. Section 17(3) bars paying wages where alcohol is sold, except to staff who work there.
Overpayments can be recovered
Paragraph (e) is real, and the courts enforce it. In Kamwega v Wananchi Group Kenya Limited [2024] KEELRC 546 (KLR), an employee declared redundant had KSh 455,339 deducted from her terminal dues to recover a bonus that had been paid to her in error. The court found she had not been entitled to the bonus, held that the recovery from her dues was fair, and dismissed her claim. If you notice an unexpected payment, ask HR in writing what it is for before you spend it.
Deducted but not remitted
The most damaging problem is money taken from your pay that never reaches NSSF, SHA, KRA, your pension scheme or your SACCO. Section 19(4) requires the employer to pay deducted amounts on time, and section 19(5) makes failure an offence carrying a fine of up to KSh 100,000, up to two years in prison, or both. Under section 19(6), the court can also order the employer to refund you and pay the intended recipient from its own funds.
In Matseshe v Kenya Institute of Management Limited [2022] KEELRC 4051 (KLR), the court ordered the employer to pay KSh 1,324,446 in unremitted pension deductions and KSh 57,475 in unremitted SACCO deductions, with interest at commercial rates, and observed that late remittance should be repaid with interest so the employee suffers no loss.
Check your statements a few times a year: your NSSF statement, KRA iTax for PAYE, your SHA record and your SACCO or pension statement. Our guide to NSSF, SHIF and the Housing Levy explains each contribution, and Business Radar’s Housing Levy guide covers the employer’s side.
Your payslip must show every deduction
Section 20 requires an itemised written pay statement at or before each payment, showing gross pay, each variable and statutory deduction and its purpose, and how the net pay is paid. It does not apply to casual or piece-rate staff, or to jobs of six months or less. Section 21 lets employers group statutory deductions only if they have given you a separate written statement of them, renewed at least every twelve months. Our payslip guide walks through every line. Civil servants can follow Business Radar’s steps to download a GHRIS payslip.
How to recover an unlawful deduction
- List the deductions month by month from your payslips and bank statements.
- Ask HR in writing for the legal basis of each one under section 19(1).
- Complain to the labour officer. Section 25(2) allows a complaint up to three years after the deduction was made, and section 25(1) requires an employer convicted under this Part to repay money wrongfully withheld or deducted.
- File a claim at the ELRC if the labour officer cannot resolve it.
If the deductions came out of your final dues, see our terminal dues guide and our guide to service pay and gratuity. For your wider rights, read our plain-English guide to the Employment Act, and browse accounting and finance jobs if payroll is your field.
Key takeaways
- Employers must pay your full wage except for the deductions listed in section 19(1).
- All deductions together cannot exceed two-thirds of your wages, so you keep at least a third.
- Repayments of an employer loan are capped at 50% of the wages left after other deductions.
- Damage and cash-shortage deductions need wilful default, or a specific contract term plus negligence or dishonesty.
- Deducting but not remitting is an offence, and courts order refunds with interest.
Frequently asked questions
What is the one-third rule on salary deductions in Kenya?
Section 19(3) of the Employment Act says total deductions at any one time cannot exceed two-thirds of your wages, unless the Cabinet Secretary prescribes otherwise. That leaves you at least one third of your pay.
Can my employer deduct money for damaged property or a cash shortage?
Only within section 19(1)(b) and (d). Damage or loss must be caused by your wilful default and the amount must be reasonable. Cash shortages can only be deducted if your contract specifically covers handling money and the loss came from your negligence or dishonesty.
What happens if my employer deducts NSSF or SACCO money but does not remit it?
That is an offence under section 19(5), with a fine of up to KSh 100,000, up to two years in prison, or both. The court can order a refund and payment to the fund, and in Matseshe v KIM (2022) the ELRC added interest at commercial rates.
How long do I have to complain about an unlawful deduction?
Section 25(2) allows a complaint to a labour officer up to three years after the deduction was made.
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