Civil servants are set to receive slightly adjusted payslips after the government announced a 7-10 per cent increase in net salaries, with the government set to backdate both the new monthly pay as well as taxes introduced in the Finance Act, 2023.
It, therefore, means that civil servants will have to pay the new taxes on their newly increased salaries for the months of July and August 2023, even though the taxes were not in effect at that time.
This backdating of new salaries and taxes is likely to have a significant impact on the take-home pay of civil servants.
For example, going forward, a civil servant who earns a monthly salary of Ksh100,000 will pay between Ksh880 to Ksh2,400 in NSSF contributions and Ksh1,500 in Housing Levy.
"Teachers under the Teachers Service Commission (TSC) have medical cover, in lieu of medical allowances, superior to NHIF but also pay a compulsory contribution to NHIF, which most don't use.
"The same teachers make compulsory contributions to the state pension scheme for their pension and must also pay NSSF deductions," an Economist, Tony Gitonga observed.
This will reduce their net pay by at least Ksh3,750 per month, hence it is possible that the new taxes will lead to increased dissatisfaction among civil servants.
However, the same civil servants have also received a 10 per cent increase in salaries, which means that an employee earning Ksh100,000 will receive an extra Ksh10,000 per month.
A section of civil servants have already expressed their displeasure with new taxes, arguing that it is unfair to make them pay taxes for months when the taxes were not in effect. They also argue that the new taxes will make it difficult for them to make ends meet.
However, the government has defended the backdating of the taxes, noting that it is necessary to ensure that everyone pays their fair share of taxes.
The government has also stated that it will use the additional revenue from the taxes to fund important development projects.
New Civil Servants Payslip Outlook
1. Teachers' Payslip
A report released by the Kenya National Bureau of Statistics (KNBS) in May 2022, revealed that the average monthly salary of teachers is Ksh61,843.
With an average Gross Salary of Ksh61,843, a teacher employed by the Teachers Service Commission (TSC) is subject to a Pay as You Earn (PAYE) deduction of Ksh10,417.25.
PAYE applies to individuals with a monthly employment income of Ksh24,000 and higher. This obligation extends to both residents and non-residents engaged in gainful employment, as well as any entity disbursing emoluments to its employees.
"As an employer, you are required to deduct PAYE from your employee's salaries and wages at the prevailing rates and remit the same to KRA on or before the 9th of the following month," the tax authority warned.
Likewise, the teacher will be required to contribute Ksh360.00 to the National Social Security Fund (NSSF Tier I) and Ksh720.00 to NSSF Tier II.
The teacher will also remit Ksh1,300.00 to the National Health Insurance Fund (NHIF), along with a 1.5 per cent Housing Levy amounting to Ksh928, based on the overall earnings.
As a result, the total deductions will amount to Ksh13,725.25, which means that the net pay for a teacher with a gross salary of Ksh61,843 will be Ksh48,117.75.
At the same time, the taxable pay will be pegged at Ksh60,763.00 since allowable deductions are rated at Ksh1,080.
2. Doctors
According to KNBS data, the average monthly salary of government workers in the health sector, who include doctors and nurses is Ksh155,377.
Based on a gross salary of Ksh155,377.00, a medical officer will have various deductions, including Ksh38,417.45 for PAYE, Ksh720.00 for NSSF Tier I, Ksh1,700.00 for NSSF Tier II, and Ksh2,331.00 for Housing Levy.
These deductions total Ksh43,528.45, resulting in a net pay of Ksh111,848.55. The calculations are based on a taxable pay of Ksh154,297.00 and an allowable deduction rate of Ksh1,080.00.
3. Police Officers
Similarly, data shared by the statistics office shows that the average monthly salary of civil servants in public administration including police officers is Ksh56,041.
Consequently, a police officer receiving a Gross Salary of Ksh56,041 will see deductions amounting to Ksh11,812.65. These deductions comprise Ksh8,691.65 for PAYE, Ksh360.00 for NSSF (Tier I), Ksh720.00 for NSSF (Tier II), Ksh1,200.00 for NHIF contributions, and Ksh841.00 for Housing Levy.
Following these deductions, the officer's net pay will be Ksh44,228.35. This computation is based on a permissible deduction rate of Ksh1,080.00 and a taxable pay of Ksh54,961.00.
