James Mutua, recently promoted within his current company, is eager to understand how his increased salary of Ksh50,000 will be impacted by various deductions, particularly Pay As You Earn (PAYE). As a diligent employee, James wants to ensure he comprehends the nuances of his salary breakdown to effectively manage his finances.
Examining Ksh50,000 Payslip
Here’s a breakdown of the potential components you might see on your payslip, based on your 50,000 KES salary:
| Description | Amount (KES) | Explanation |
|---|---|---|
| Basic Pay | 50,000.00 | This is your total salary before any deductions. |
| NSSF Contribution (National Social Security Fund) | -2,160.00 | This mandatory contribution goes towards your retirement benefits. |
| Taxable Pay | 47,840.00 | This is your basic pay minus NSSF, used to calculate income tax. |
| Income Tax | -9,135.36 | This is the estimated tax payable to KRA based on your taxable income. |
| Tax Reliefs | These deductions reduce your tax liability: | |
| – Insurance Relief (15% of NHIF) | +180.00 | Reduces tax by 15% of your monthly NHIF contribution. |
| – AHL Relief (15% of Housing Levy) | +112.50 | Reduces tax by 15% of your monthly Housing Levy contribution. |
| – Personal Relief | +2,400.00 | Basic tax-free amount provided by the government. |
| Total Tax Reliefs | +2,692.50 | Total tax reliefs deducted from your income tax. |
| PAYE (Tax Payable) | -6,442.86 | This is your income tax minus tax reliefs (the remaining tax to be paid). |
| Net Pay | 41,397.14 | This is your take-home pay after tax deductions (NSSF, PAYE). |
| NHIF Contribution (National Hospital Insurance Fund) | -1,200.00 | This mandatory contribution provides you with access to healthcare services. |
| Housing Levy (Affordable Housing Development Levy) | -750.00 | This mandatory contribution goes towards affordable housing initiatives. Note: Housing Levy is deducted after tax. |
| Total Deductions | -10,552.86 | Sum of all deductions from your gross pay (NSSF, NHIF, PAYE, Housing Levy) |
| Net Pay | 39,447.14 | This is your final take-home pay after all deductions. |
James Mutua’s scenario illustrates the importance of understanding salary deductions, particularly in the context of a salary increase due to a promotion. By comprehending the components of his salary breakdown, James can make informed financial decisions and effectively budget his increased income.
Remember
- This is a simplified example, and it’s important to note that actual deductions may vary based on individual circumstances such as additional allowances, benefits, and any other applicable deductions specific to your employment situation. For a more precise calculation tailored to your circumstances, you can utilize the PAYE calculator