Teachers, civil servants and other employees will pay 1.5% of their gross pay towards the housing fund.
The tax will be backdated from 1st July 2023. Employers will also contribute the same amount for their employees.
The taxman has already directed employers to use gross pay when calculating what to deduct from staff salaries as housing levy, revealing the hidden pain for workers in the controversial tax starting this month.
The directive, which has sent shockwaves across human resource departments, means that the Kenya Revenue Authority (KRA) will require that allowances paid to staff such as hardship, commuter etc be included while making monthly computations.
The allowances had been left out in the initial draft Finance Bill, which provided for a housing fund.
Government employees are expecting a salary increment in their August salaries.
The Salaries and Remuneration Commission (SRC) announced a 7-10 per cent salary rise for civil servants, backdated to July 1.
The increment will cost taxpayers Ksh21.7 billion more for the financial year 2023/2024, with teachers getting the lion’s share of Ksh9.5 billion.
According to SCR, the average increase is 7 to 10 per cent over a two-year period, inclusive of the existing notch increase, which averages 3 per cent annually.
“Where the salary structures are frozen, the notch increase will continue as budgeted up to the maximum salary point,” SRC announced.
Of the Ksh21.7 billion, executive state officers will get Ksh126.9 million while Parliament state officers will get 78.9 million.
Judiciary state officers will get Ksh308.2 million, county state officers will get Ksh408.9 million while civil servants will get Ksh1.8 billion.
County governments will pocket Ksh4.1 billion while uniformed and disciplined forces will earn Ksh4.5 billion. Other public officers will get Ksh745.6 million.
“Increase in employee numbers is a key contributor to the increase in the wage bill as an absolute amount. As a developing nation, the government will continue to employ in key sectors to achieve the ideal ratios for effective service delivery, notably in teaching, healthcare, and security. However, increase in employee numbers is not always attributed to service delivery in critical areas,” SRC added.