SHIF vs NHIF: What Changed and What It Means for Your Payroll

The Social Health Insurance Fund (SHIF) replaced the National Hospital Insurance Fund (NHIF) effective October 2024. The transition came with a change in how contributions are calculated, what the employer is required to contribute, and how the deduction appears in payroll.

Here is what changed and what it means for your monthly payroll run.

The old NHIF structure

NHIF operated on a banded contribution model. Monthly contributions were a fixed amount determined by the employee's salary band — ranging from KES 150 for the lowest earners to KES 1,700 for those earning above KES 100,000. The contribution was the same whether you earned KES 100,001 or KES 1,000,000.

Employers did not have a matching contribution obligation under NHIF. Only the employee's deduction was required.

The new SHIF structure

SHIF calculates contributions as 2.75% of gross salary, with no upper cap. This is the most significant structural change.

For an employee earning KES 80,000 per month:

• Old NHIF: KES 1,700 (fixed, based on band)
• New SHIF: 2.75% × KES 80,000 = KES 2,200

For an employee earning KES 200,000:

• Old NHIF: KES 1,700 (same as above — capped)
• New SHIF: 2.75% × KES 200,000 = KES 5,500

High earners saw a substantial increase in their health contribution.

What this means for employers

The SHIF Act introduced an employer matching contribution. For every KES contributed by the employee, the employer must contribute an equal amount. This is a cost employers did not have under NHIF.

For a company with 30 employees averaging KES 60,000 in gross salary:

• Employee SHIF deduction: 2.75% × KES 60,000 = KES 1,650 per employee
• Employer SHIF contribution: KES 1,650 per employee
• Total monthly SHIF cost to the company: KES 99,000

Under NHIF, the employer had no matching obligation and the total payroll-side cost was KES 0 (only the employee's deduction was administered).

Common payroll errors during the transition

Still deducting at NHIF rates. Some payroll systems were not updated at transition. If your payslips still show NHIF or a fixed deduction amount rather than a percentage of gross, your calculation is wrong.

Not accounting for the employer portion. Many payroll configurations correctly compute the employee deduction but omit the employer contribution from the remittance. SHIF audits check both sides.

Using net salary as the basis. SHIF is calculated on gross salary, not net salary or basic salary. Housing allowances, transport allowances, and all other emoluments are included in the gross figure.

Wrong remittance reference. NHIF and SHIF have different remittance portals and reference numbers. Using old payment references results in unmatched contributions.

Practical check

Take any employee payslip from your last payroll run. Divide their health deduction by their gross salary. The result should be 0.0275 (2.75%). If it is not — if you get a round number like 0.021 or 0.017, or if the percentage varies between employees — your calculation is incorrect.

AndikishaHR applied the SHIF transition automatically in October 2024. Every payroll run since has used the 2.75% gross salary basis, with both the employee and employer contributions calculated and split correctly in the remittance report.

If you are uncertain whether your current payroll system handled the transition correctly, checking a few payslips against this formula will tell you immediately.