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How SHA, housing levy squeeze triggered breach of one-third pay rule
Auditor General Nancy Gathungu making a presentation during the 8th Public Finance Management (PFM) Conference on November 5, 2025, at the Grand Royal Swiss Hotel, Kisumu.
The net pay of thousands of State workers has fallen below one-third of their basic salary following higher mandatory deductions for healthcare, retirement, and housing, leaving employers in breach of the law on minimum take-home pay.
Disclosures from various State employers, including National Police Service (NPS) and Teachers Service Commission (TSC), show that the introduction of a 1.5 percent housing levy, 2.75 percent to Social Health Authority (SHA) and higher deductions towards National Social Security Fund have cut net pay, placing thousands of workers under financial pressure.
The Employment Act, 2007, prohibits employers from deducting more than two-thirds of the basic pay of an employee to safeguard their rightful gains from employment.
However, recent audit findings indicate that compliance has been increasingly difficult amid the layering of statutory deductions alongside existing loan repayments.
For instance, TSC says 6,129 teachers earned net salaries of less than a third of their basic pay in the year ended June 2025. The Auditor-General's report warned that affected teachers pose the risk of “pecuniary embarrassment” to TSC.
The NPS report showed 5,445 employees earned a net pay of less than a third of their basic pay as at the end of June 2025. The Auditor-General report shows in the year to June 2025, payroll revealed that 36,662 workers were affected during various months.
The police service explained that the move to introduce mandatory NSSF contributions to all civil servants in July 2023, followed by the housing levy in August of the same year and SHA deductions early 2024, triggered the breach.
“Most of the officers had committed their salary on servicing other financial obligations. This in effect, pushed their net salary below a third of basic salary,” said the service in the annual report.
The widespread breach has seen some members of Parliament propose amending the Employment Act, 2007 to remove the one-third salary rule, citing the impracticality of enforcing it given the impact of increased statutory deductions.
The MPs under the Public Accounts Committee condemned the State Department for Irrigation for having given 20 of its staff whose net pay fell in breach 14 days to “resolve their financial matters or face disciplinary action.”
“What kind of disciplinary action do you intend to take? Fire them? Do you expect them to sell their properties just to offset loans and bring their salaries into compliance? This is simply unfair and inhumane,” asked Funyula MP Wilberforce Oundo.
Last year, real wages for public sector workers fell 2.2 percent to Sh600,600 or Sh50,046 a month, continuing a trend that started over five years ago. In 2021, real wages averaged Sh59,622 a month.
National Land Commission (NLC), which saw 21 employees left with less than one third of their basic pay, linked the breach to the three deductions as well as court-ordered child upkeep.
“Some employees faced salary deductions due to court-ordered child support. These statutory adjustments significantly raised overall deductions, inadvertently causing certain employees' net pay to drop below the legally required minimum,” explained NLC.
The Salaries and Remuneration Commission (SRC) faced a similar breach but did not disclose the number of affected workers.
“The management advised all affected employees to restructure their pending/ongoing financial obligations to comply with the one-third of basic salary rule,” said SRC.
At the University of Nairobi, the institution said it had advised employees to pass some of the deductions outside the payslip.
“The university has flagged off those affected by the recent changes in statutory legislation and advised them to plan out-of-payroll payments,” said the university in its latest annual report.
At Kenya Reinsurance Corporation, 145 employees drew a net pay below a third of their basic pay during the year ended June 2025 when an undisclosed number of staff at Kenya Medical Supplies Authority and Kenya National Highways Authority also faced a similar challenge.
