NSSF Tier II Contributions 2026: Rates, 4 Worked Examples and Contracting Out

Updated 7 November 2026

NSSF Tier II is the second layer of the National Social Security Fund contribution on a Kenyan payslip. Since February 2026 it is 6% of pensionable pay between KSh 9,000 and KSh 108,000 a month, paid by the employee and matched by the employer. The most each side pays into Tier II is KSh 5,940 a month. An employer may send Tier II to an approved private pension scheme instead of NSSF, a process called contracting out.

Checked on 7 November 2026 against the NSSF notice to employers on Year 4 (2026) contribution rates, the KRA NSSF calculator, the Retirement Benefits Authority’s Form C1 for contracting out, PwC Kenya’s Year 4 tax alert and Daily Nation’s report of 26 June 2026 on the court case.

Contents: Tier I vs Tier II · 2026 rates · Worked examples · Contracting out · Court case · Payroll checklist · FAQ

NSSF Tier I vs NSSF Tier II

The NSSF Act, 2013 replaced the old flat KSh 200 contribution with a percentage of pay split into two bands:

• Tier I covers pensionable pay up to the Lower Earnings Limit (LEL). It always goes to NSSF.
• Tier II covers pay above the LEL up to the Upper Earnings Limit (UEL). It goes to NSSF unless the employer has contracted out to a registered private scheme.

Both tiers are charged at 6% for the employee and 6% for the employer. Pay above the UEL attracts no NSSF contribution.

NSSF Tier II rates for 2026

The NSSF notice to employers says Year 4 rates took effect in February 2026 under the Third Schedule of the Act. PwC notes that Year 4 is the last step of the four-year phase-in; later changes are to come through Gazette notices.

The notice also reminds employers that remittances are due by the 9th day of the following month.

Four worked NSSF Tier II examples

These use the Year 4 limits and show the employee’s share; the employer pays the same again.

• Pay KSh 8,000. Tier I: 6% × 8,000 = KSh 480. Tier II: nil, because pay is below the LEL.
• Pay KSh 50,000. Tier I: KSh 540. Tier II: 6% × (50,000 − 9,000) = KSh 2,460. Employee total KSh 3,000.
• Pay KSh 108,000. Tier I: KSh 540. Tier II: 6% × 99,000 = KSh 5,940. Employee total KSh 6,480.
• Pay KSh 250,000. Same as KSh 108,000: Tier II stops at the UEL, so the employee still pays KSh 5,940 into Tier II.

KRA’s calculator notes that NSSF deductions come off pay before PAYE is worked out, so a higher Tier II slightly reduces taxable pay. Our PAYE calculator shows the full net-pay effect.

Contracting out of NSSF Tier II

Contracting out lets an employer pay the Tier II part of both shares into a private occupational or umbrella scheme instead of NSSF. Tier I still goes to NSSF. The RBA’s Form C1 shows what the regulator expects:

• employer details, its NSSF number and whether opting out covers all staff or named categories, with reasons;
• the receiving scheme’s RBA registration, trustees and administrator;
• a board resolution and an undertaking to keep paying the statutory minimum;
• trustee consent to receive Tier II money;
• a declaration that the scheme meets the reference test in the Fourth Schedule of the Act;
• an undertaking on handling “protected rights”, and a copy of the written notice given to employees.

PwC’s alert says the RBA must be told in writing at least 60 days before the switch. The employer’s choice of scheme affects fees and investment returns, so compare options; our guide to umbrella schemes versus your own scheme covers the trade-offs.

The court case behind the rates

The higher contributions have been in court for years. In September 2022 the Employment and Labour Relations Court declared parts of the NSSF Act, 2013 unconstitutional. The Court of Appeal reversed that in February 2023, but the Supreme Court sent the case back in February 2024 for a hearing on the merits. That appeal had not been decided when this guide was checked.

On 29 May 2026 the Court of Appeal issued a ruling that led some lawyers to argue for a return to KSh 200. On 26 June 2026 the same court set that ruling aside, saying it had decided an application that was no longer live, the Daily Nation reported. NSSF says the Year 4 rates still apply and has warned of penalties for underpaying. Employers who are unsure should take legal advice and keep records of what they deduct and remit.

NSSF Tier II payroll checklist

1. Set the LEL at KSh 9,000 and the UEL at KSh 108,000 in the payroll system.
2. Calculate Tier II on pensionable pay only, as defined in your contract and scheme rules.
3. Match each employee’s Tier II with the employer share.
4. Remit by the 9th of the following month, to NSSF or to your contracted-out scheme.
5. Show Tier I and Tier II separately on payslips so staff can check them; our payslip guide explains each line.
6. Watch for a Gazette notice before February 2027, when the next limits are expected.

Frequently asked questions

How much is NSSF Tier II in 2026?

6% of pay between KSh 9,000 and KSh 108,000 from the employee and the same from the employer, up to KSh 5,940 each a month.

Can an employee choose to leave NSSF Tier II?

No. Contracting out is an employer decision. The employer applies to the RBA and the money goes to the employer’s chosen registered scheme.

Is NSSF Tier II deducted before PAYE?

Yes. KRA’s calculator says NSSF deductions reduce taxable income before PAYE is calculated.

Has the court stopped the higher NSSF rates?

No final decision has been made. The Court of Appeal set aside its 29 May 2026 ruling on 26 June 2026, and NSSF says Year 4 rates apply while the appeal is pending.