Introduction

Payroll management is crucial for any business, ensuring employees are paid on time while statutory deductions are correctly remitted. However, not all businesses—especially small enterprises, startups, and informal employers in Kenya—use bank accounts for payroll. To accommodate this, the Kenya Revenue Authority (KRA) allows businesses to process payroll and remit taxes without a bank account through mobile money services and cash payments, provided they follow the proper procedures.

This guide will walk you through how to pay employees via mobile money or cash, deduct and remit statutory contributions (PAYE, NSSF, SHA), file payroll taxes without a bank account, and ensure full compliance with KRA regulations.

Why Some Businesses in Kenya Operate Without a Bank Account

Not every business relies on a bank account to process payroll. Here’s why:

1. Limited Access to Banking Services

• Many businesses operate in remote areas where banks are scarce or completely unavailable.
• Employees may lack bank accounts, making mobile money or cash payments a more practical option.
• Banking infrastructure challenges make it difficult for some businesses to open and maintain a business bank account.

2. Mobile Money as a Preferred Alternative

• Kenya is a leader in mobile money adoption, with services like M-Pesa, Airtel Money, and T-Kash providing fast and reliable payment solutions.
• Mobile money allows instant salary disbursements, eliminating delays associated with bank transfers.
• Mobile payments are more convenient because they can be accessed from anywhere—employees don’t need to visit a bank.

3. Cost Efficiency

• Banks charge maintenance fees and transaction costs that can add up over time, increasing payroll expenses.
• Mobile money transactions are cheaper and more predictable, allowing businesses to minimize payroll costs.
• Employers can use M-Pesa bulk payment services to reduce individual transaction fees when paying multiple employees.

📌 Important Note: Even if salaries are paid in cash or via mobile money, employers are still legally required to deduct and remit statutory contributions (PAYE, NSSF, SHA) to KRA to avoid penalties.

Now that you understand why many businesses in Kenya operate without a bank account, let’s dive into the step-by-step process of managing payroll while staying compliant with KRA regulations. From selecting the right salary payment method to filing payroll taxes, follow these key steps to ensure smooth and efficient payroll processing.

• Step 1: Choosing a Salary Payment Method Without a Bank Account

Businesses without bank accounts must choose a reliable and compliant method for salary disbursement.

A. Mobile Money Payroll (M-Pesa, Airtel Money, T-Kash)

Mobile money is the most efficient and well-documented method for payroll processing.

How to Pay Employees Using M-Pesa Bulk Payments:

Register for M-Pesa Business Services through Safaricom.
Upload payroll details, including employee names, phone numbers, and salary amounts.
Process bulk payments instantly via M-Pesa Business Till or Pochi la Biashara.
📌 Tip: M-Pesa transactions generate digital records, making tax compliance and payroll tracking easier.

B. Cash Payments

Some businesses still prefer cash payments, especially in informal sectors or areas with limited mobile money access.
However, KRA requires proper documentation for compliance.
How to Maintain Payroll Records for Cash Payments:
✔️ Issue manual payslips with salary breakdowns.
✔️ Keep a signed payroll register, where employees acknowledge receipt of their payments.
✔️ Maintain payroll records for at least 5 years (as required by KRA for audits).

• Step 2: Processing Payroll and Deducting Statutory Payments

Regardless of how salaries are paid, employers must deduct and remit statutory contributions to remain compliant.

1. Calculate Salaries & Deductions

Gross Salary – The total earnings before deductions.
Net Salary – The actual amount an employee receives after all deductions.

2. Mandatory Payroll Deductions in Kenya

PAYE (Pay As You Earn)

• PAYE is income tax deducted based on salary brackets, as outlined by KRA.
• Employers must file PAYE tax returns and remit deducted amounts to KRA monthly.

NSSF (National Social Security Fund)

• NSSF is a mandatory pension contribution deducted from employees’ salaries.
• Contributions are classified into Tier I and Tier II, depending on income levels.

SHA (Social Health Authority) – Replaced NHIF in October 2024

• The SHA now manages Kenya’s public health insurance system.
• SHA contributions ensure employees have access to medical coverage.
• Employers must register all employees with SHA for them to receive health benefits.

3. Generate a Payroll Report
Employers must keep detailed payroll records, including:

• Employee names and ID details
• Gross salary before deductions
• PAYE, SHA, and NSSF deductions
• Net salary paid (via M-Pesa or cash)

📌 Why? KRA requires these reports for tax filing and auditing purposes.

• Step 3: Filing Payroll Taxes with KRA (Without a Bank Account)

Employers must remit payroll taxes using mobile-friendly payment options.

1. Log into KRA iTax

• Visit the KRA iTax Portal.
• Navigate to the PAYE filing section.
• Enter payroll details and confirm tax amounts.

2. Generate a Payment Slip

• Enter PAYE, SHA, and NSSF contribution details.
• Download the KRA payment slip, which contains a Payment Registration Number (PRN).

3. Pay via M-Pesa Pay Bill (572572)

The official M-Pesa Pay Bill Number for all KRA tax payments is 572572.

How to Pay Using M-Pesa:

• Open M-Pesa on your phone.
• Select Lipa na M-Pesa → Pay Bill.
• Enter 572572 as the Pay Bill number.
• Use the PRN (Payment Registration Number) as the account number.

Confirm and complete the payment.

💡 Alternative Payment Methods: Employers can also pay in cash at KRA-designated banks or authorized agents.

• Step 4: Issuing Payslips and Maintaining Payroll Records

• Employers must provide employees with payslips detailing salary breakdowns.
• Payroll records must be maintained for at least 5 years to comply with KRA audit requirements.

Why This Matters?

• Protects businesses from tax disputes.
• Ensures compliance with KRA regulations.
• Helps with financial planning and audits.

Final Thoughts: Can You Process Payroll Without a Bank Account?
✅ YES! Mobile money and cash payments allow businesses to process payroll without a bank account.
✅ BUT, employers must still deduct statutory payments and remit them to KRA using mobile-friendly payment options.

FAQs

1. Can I pay employees in cash and still comply with KRA?

Yes! As long as you deduct taxes, submit payroll reports, and maintain proper records, cash payments are legal.

2. How do I pay KRA taxes if I don’t have a bank account?

Use M-Pesa Pay Bill (222222) or visit an authorized KRA payment agent.

3. Do I need payroll software?

Not mandatory, but payroll software simplifies compliance, reduces errors, and saves time.