Year-end bonus tax in Kenya: 7 payroll facts for December

Updated 10 November 2026

Year-end bonus tax in Kenya works the same way as tax on salary: a cash bonus, including a so-called 13th cheque, is employment income and goes through PAYE in the month it is paid. Your employer adds it to that month’s pay and applies the monthly tax bands, which is why a December payslip with a bonus often shows a much larger deduction than usual. There is no separate flat bonus rate. Whether you are entitled to a bonus at all depends on your contract, policy or collective agreement, not on a general rule in the Employment Act.

Checked on 7 November 2026 against the KRA PAYE page and section 5 of the Income Tax Act as published by KRA. A proposed PAYE change announced in October 2026 was not law at the time of writing.

1. A bonus is taxable employment income

Section 5(2)(a) of the Income Tax Act lists “bonus” among the gains or profits from employment, alongside wages, salary, leave pay, commission and gratuity. KRA’s PAYE guidance says the same thing in plain terms: cash pay includes wages, salary, overtime, commissions and bonuses, and the employer must deduct PAYE and remit it. So a December performance bonus, a profit share paid as cash, or a fixed 13th-month payment is all taxed through payroll.

The Act also says an amount received for services rendered in a different year is deemed income of that other year. In practice, most employers simply run the bonus through the payroll month in which it is paid; if your bonus relates to an earlier year, ask payroll how it has been treated.

2. Bonus month, bigger PAYE

PAYE uses monthly bands. Under the Finance Act 2023 bands shown by KRA, the first KSh 24,000 of monthly taxable pay is taxed at 10%, the next KSh 8,333 at 25%, the next KSh 467,667 at 30%, the next KSh 300,000 at 32.5% and everything above KSh 800,000 at 35%. Resident employees then get KSh 2,400 of personal relief each month.

Because the bonus is stacked on top of a normal salary, the whole bonus usually falls into your highest band for that month. A worker whose regular taxable pay is already above KSh 32,333 pays at least 30% on each extra shilling of bonus. A large bonus can push part of the month’s pay into the 32.5% or 35% band. That is why the year-end bonus tax looks heavy: it is not a special charge, just the top of your band applied to a lump sum.

Some deductions reduce the taxable amount. KRA lists SHIF contributions, the Affordable Housing Levy and registered pension contributions (up to KSh 30,000 a month) as allowable deductions. Our PAYE tax bands and housing levy table shows the full order of calculation.

3. A worked example

The year-end bonus tax is easiest to see with numbers. Take an employee whose regular taxable pay is already well inside the 30% band, receiving a KSh 100,000 bonus in December.

If your payroll also charges SHIF (2.75%) and the Housing Levy (1.5%) on the bonus, those deductions are taken from the bonus too, but because they are deductible for PAYE they also trim the tax slightly. The exact figure depends on how your employer’s payroll treats each statutory deduction, so check the line items on the payslip. Use our PAYE calculator with your salary plus bonus as the month’s gross pay to estimate your own case.

An employee earning less than KSh 24,000 a month in taxable pay effectively pays no PAYE because of the relief, but a bonus can lift that month into the 25% and 30% bands.

4. Is a 13th cheque mandatory?

Before worrying about year-end bonus tax, check whether a bonus is owed at all. We found no general provision in the Employment Act, 2007 that requires every employer to pay a year-end bonus or a 13th-month salary. Whether you are owed one depends on the documents that govern your job:

• Your contract or letter of appointment. If it promises a fixed 13th-month payment, it is a contractual term.
• A collective bargaining agreement. Unionised workplaces may have bonus clauses in their CBA.
• A written bonus policy. Many schemes are discretionary and tied to company or individual performance.

If a bonus is described as discretionary, the employer usually has room to decide whether and how much to pay. If it is fixed in your contract, it is part of what you agreed. Ask HR for the written policy rather than relying on last year’s practice. When you start a new job, our first payslip guide explains how to read each pay line.

5. Gifts, hampers and non-cash rewards

Not every December reward is taxed like cash. KRA says non-cash benefits are taxable only above KSh 5,000 a month or KSh 60,000 a year, and section 5(2)(b) of the Act uses the same KSh 60,000 annual threshold. A modest Christmas hamper or end-year lunch therefore normally sits within the limit, while gift vouchers, cash-like cards or expensive items may not. Employers who give vouchers should treat them carefully and take advice, because a voucher can be closer to cash than a hamper.

6. Employer deadlines

For employers, the year-end bonus tax is remitted with ordinary PAYE: KRA requires PAYE to be deducted and paid, and the PAYE return filed on iTax, on or before the 9th of the following month. A December bonus is therefore due by 9 January. KRA lists penalties of 5% of the tax due plus 1% interest a month for late payment, and the higher of 25% of the tax due or KSh 10,000 for late filing or failing to deduct. Budget for the employer’s own share of statutory contributions where your payroll applies them to the bonus, and see our KRA tax deadlines calendar.

7. The pending PAYE proposal

In October 2026, National Treasury Cabinet Secretary John Mbadi announced a plan to zero-rate the first KSh 32,333 of monthly pay and scrap the KSh 2,400 personal relief. Media reports say the bands from 30% upward would not change. The proposal needs an Act of Parliament and was not law when we checked. If it is enacted before your bonus is paid, payroll will apply whatever bands are then in force. Do not plan your year-end bonus tax on the new bands until KRA publishes them.

Frequently asked questions

Is a year-end bonus taxed at a special rate in Kenya?

No. It is added to the month’s pay and taxed through PAYE under the normal monthly bands, so it is often taxed at your highest marginal rate.

Why did my bonus month take so much tax?

The year-end bonus tax feels heavy because the whole bonus sits on top of your salary for that month, it is taxed at your top band, which is at least 30% for many salaried staff.

Is my employer required to pay a 13th cheque?

Only if your contract, collective agreement or a binding policy says so. We found no general Employment Act rule requiring it.

Are Christmas hampers taxable?

Non-cash benefits are taxable above KSh 5,000 a month or KSh 60,000 a year according to KRA, so modest hampers usually fall within the limit.