As the year comes to a close, many employers are preparing to issue December bonuses to their employees. However, with the holiday season in full swing, there are often questions about the applicability of certain contributions, such as the Affordable Housing Levy and Social Health Insurance Fund (SHIF), on these bonuses. To clear up any confusion, let’s dive into what these contributions are and whether they apply to one-time December bonuses.
What is Housing Levy and SHIF?
Before we discuss the impact on bonuses, it’s important to understand what Housing Levy is and what is SHIF.
Affordable Housing Levy
The Affordable Housing Levy is a mandatory contribution of 1.5% of an employee’s gross salary. The purpose of this levy is to fund housing programs and improve access to affordable housing for citizens.
Social Health Insurance Fund (SHIF)
The SHIF contribution is a similar concept but with a slightly higher rate of 2.75% of an employee’s gross salary. SHIF is a new health insurance scheme in Kenya that aims to provide comprehensive health coverage to all Kenyans:
Does Affordable Housing Levy and SHIF apply to Bonuses?
Here’s the good news for employers and employees during the bonus season: Housing Levy and SHIF contributions do not apply to one-time bonuses. These contributions are only calculated on an employee’s regular salary and other consistent payments, such as allowances. However, they are not applicable to annual or performance-based bonuses, which are typically paid out in December.
This means that when you’re distributing your December bonuses, you do not need to deduct Affordable Housing Levy or SHIF contributions from those one-time payments. The deductions should only be applied to the regular salary payments made throughout the month.
Why Is This Important for Employers?
It’s crucial for employers to understand these guidelines to ensure compliance with the regulations and avoid any unnecessary deductions. Since these contributions are not required on annual bonuses or performance bonuses, you can help your employees make the most of their December bonuses without the extra deductions.
If you have any further questions or concerns about how to manage these contributions, it’s a good idea to refer to official guidelines or consult with relevant authorities.